Category Archives: b) Financial System

Frequently, you can hear (or read) that because stock returns have been, on average, materially higher than average US GDP growth rates, there’s a big disconnect and shouldn’t the two roughly match? Hence, doesn’t that mean a new era of long-term lousy stock returns must kick off, forthwith?

Stock returns shouldn’t match GDP growth rates. The two aren’t linked and shouldn’t be–stocks can appreciate at a much faster rate.

Source: Stock Returns Versus GDP

Conventional wisdom holds that if a global stock investor can identify which countries’ economies will grow briskly and which will lag, she’s conquered half of the investment battle. Economic growth should translate into higher corporate earnings per share and thus rising stock prices, so she favors the economies where she […]

Source: Economic Growth and Investor Returns: The Great Disconnect