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Apart from a war or a government collapse, in the long run the stock market will go up if the economy is expanding. Likewise, it will go down if the economy is
by proverbialbunny 6y ago
Apart from a war or a government collapse, in the long run the stock market will go up if the economy is expanding. Likewise, it will go down if the economy is contracting. (Eg, Japan with more people dying than new people coming into the country.)
imo the fallacy is assuming the economy will continue to grow at the same 7% in the long run, when the more mature an economy becomes the less it will grow and from that the less growth to the stock market will happen. imo 6% long run for the future is a safer number.
- whatever1 6y agoThe mistake is the assumption that the stock market reflects the (expectation of) economical output of a country. European GDP has doubled since 2000, but the stock market is on average flat (see for example Stoxx50). Some member states' stock markets grew, but most of them either stayed stagnant or plummeted completely.
- proverbialbunny 6y agoIf you invested in the FTSE you would have made rates near US investments, because of the dividends given out. The 1960s and 70s was similar in the US where the market went sideways for decades, but if you had invested you would have profited just fine, because of the dividends given out at that time too. imo Europe is being smarter about this. The US is potentially setting itself up for a large crash in the coming decades, where Europe is setting itself up for a much smaller crash, due to being dividend heavy instead of growth heavy. Ofc, I don't really know if it will work out this way. No one does, but we can speculate.