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The market was up over 30% last year, but GDP growth was certainly not 30%.
by leptoniscool 7y ago
The market was up over 30% last year, but GDP growth was certainly not 30%.
- azhenley 7y agoGDP is not a perfect indicator.
- pastor_elm 7y agoThe stock market must break records week after week. This is a direct order from the president to the Fed.
- friedman23 7y agoThis can be explained by market consolidation. GDP and market returns are not supposed to be perfectly correlated.
- asdfadsfgfdda 7y agoI think it's better explained by interest rates dropping over 2019. There are now more savers with fewer opportunities to make a return on their capital. So even with constant corporate earnings, there are more savers trying to buy a share of those earnings. Basically, the opposite of this explanation: https://www.thebalance.com/why-do-asset-prices-fall-when-interest-rates-increase-357150 https://www.thebalance.com/why-do-asset-prices-fall-when-int...
- driverdan 7y agoWhat's your point? Those two numbers do not directly correlate.
- ehsankia 7y ago> Those two numbers do not directly correlate I think that's the point. Sometimes it's useful to point out the obvious.
- favorited 7y agoIt's called the "Buffett Indicator" – the US market cap divided by the US GDP. It peaked before the dot-com bubble burst, and before the 08 recession, and has been at its all-time high recently. https://finance.yahoo.com/news/buffett-indicator-signals-warning-global-154545117.html https://finance.yahoo.com/news/buffett-indicator-signals-war...
- proverbialbunny 7y agoThis is a similar indicator but potentially a better one than just GDP: https://fred.stlouisfed.org/series/CPROFIT https://fred.stlouisfed.org/series/CPROFIT If you overlap it with the stock market, the only other time in US history where stock continued to go up for multiple years where corporate profit stagnated is 1999. Normally the stock market and corp profits line up somewhat strongly.
- maerF0x0 7y agoHere's a simple thought exercise. If your company produced the same product, but for less money. Would the company be worth more? If your ownership increased via buy back, would your holdings increase in value? If your debts were financed at a lower average rate would the value of your company go up ? (sort of a sub case of expenses) These are some of the myriad of ways that a portfolio can move in disconnect from GDP.
- perfunctory 7y agoWell, according to some Thomas Piketty r > g.