The latest jitters in markets are widely attributed to concerns about growth. Slowdowns are considered more “fundamental” than panics over Greece, say, or tensions on the Korean peninsula. Sparking a sell-off in equities across Asia yesterday, Chinese manufacturing in May expanded less than expected and property sales plummeted. In the eurozone, unemployed numbers hit a 12-year high. Recent data out of the US have also disappointed.

But stock investors are muddle-headed about economic growth. Mostly it is considered a good thing, leading to more sales and profits. Other times, however, it is seen to foreshadow rises in interest rates – a bad thing for share prices. The truth is economic growth should be considered in the same way as an individual company's top line: interesting but ultimately irrelevant from a valuation perspective.

What matters to shareholders is some measure of profitability versus invested capital. Well-run retailers, for example, increase returns every year with zero or very little top-line growth. Certainly, profit growth helps. A simplistic dividend growth model highlights sensitivities for the S&P 500 index: reducing the perpetuity growth rate from 6 to 5 per cent would chop one-third off the market's fair value, other things being equal.