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Forgive my ignorance but how does the stock market as a whole keep growing if the GDP isn't growing at a similar rate? where is all the attributed value coming
by kingkongjaffa 9y ago
Forgive my ignorance but how does the stock market as a whole keep growing if the GDP isn't growing at a similar rate? where is all the attributed value coming from?
Or am I thinking about it the wrong way
?
- sheeshkebab 9y agoProbably hidden inflation... There is only so much stuff someone needs to buy before starting to sink the rest into index funds/stocks/speculative things.
- lmm 9y agoEquities are only one sector. As a very simplistic model, imagine that companies were growing at the same time that property was getting less valuable, then we might see flat GDP but a growth in stocks and a fall in real-estate values. (Of course some real-estate holders are equity-funded, but many aren't; since returns are predictable and consistent, real-estate tends to be mostly funded by debt, whereas equity funding is more appropriate for more volatile things like research- or consumption-driven companies). The stock market correlates decently with "the economy" generally, but it's not the whole thing, and many would consider a portfolio that included both stocks and bonds, and perhaps property or other assets as well, to be more reflective of the overall economy.