3 ms·
The performance of the economy has nothing to do with investment returns. Paradoxically, the correlation between economic growth and stock market returns is act
by pdog 9y ago
The performance of the economy has nothing to do with investment returns. Paradoxically, the correlation between economic growth and stock market returns is actually negative[1][2][3]. Investors can do well in stagnating economies. Also, the anti-corruption campaign[4] happening in China right now is probably the farthest reaching since its imperial days.
[1]: https://www.economist.com/blogs/buttonwood/2014/02/growth-and-markets https://www.economist.com/blogs/buttonwood/2014/02/growth-an...
[2]: https://www.ft.com/content/8b5ae298-a065-11e2-a6e1-00144feabdc0 https://www.ft.com/content/8b5ae298-a065-11e2-a6e1-00144feab...
[3]: http://www.moneyobserver.com/opinion/gdp-makes-stocks-grow-fishers-financial-mythbusters http://www.moneyobserver.com/opinion/gdp-makes-stocks-grow-f...
[4]: https://en.wikipedia.org/wiki/Anti-corruption_campaign_under_Xi_Jinping https://en.wikipedia.org/wiki/Anti-corruption_campaign_under...
- coliveira 9y agoThe economic explanation for this is quite simple: huge growth in the stock market means that money is being taken from productive and moved into speculative vehicles. The higher the growth in the stock market, the higher the desire to move more money into stock (the phenomenon of "chasing returns"). So, contrary to what most economists say, a high growth in the stock market is a primary indicator that the real economy is lacking investment. Of course the result is that a huge recession follows, which is "explained away" by economists as the "normal investment cycle".