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I could be mistaken but using the S&P500 index might be slightly problematic in that the companies that compose this index change all the time. This almost guar

I could be mistaken but using the S&P500 index might be slightly problematic in that the companies that compose this index change all the time. This almost guarantees that the index increases in value over time as high performers are added and low performers are removed. There is an upward bias. I don't doubt that overall, on average, much growth has come from a 40 year decline in interest rates and a consistent lowering of corporate taxes, but new companies in new industries will continue to be founded and feature explosive growth. We aren't stuck with a static set of companies.

erokar 2y ago
Yes, the S&P500 could in a sense be said to implement a momentum based trading strategy.
paxys 2y ago
The companies that compose the entire stock market also change all the time, and follow the same pattern (winners rise, losers go bankrupt). So the S&P 500 is still a good benchmark of overall stock market performance.
- nemo44x 2y ago
  So as long as innovation is outgrowing stagnation then returns should continue to outpace typical zero risk interest. In essence if you believe the stock market will fail to exhibit growth you’re betting against technological progress and productivity gains. Bad bet I’d say.
  - kgwgk 2y ago
    > returns should continue to outpace typical zero risk interest. In essence if you believe the stock market will fail to exhibit growth Who are you arguing against? The paper linked talks about "significantly lower profit growth and stock returns in the future" not about decreasing earnings and negative returns.
tway_GdBRwW 2y ago
You are correct that even if the US stock market flatlines for the next 20 years, there will be individual companies which do extremely well, and others which die. That's not what this article is about. The article is about average corporate profits in the current-to-the-point-in-time largest US companies. And using the SP500 allows the analysis to be consistent even as the mix of the SP500 changes. And no, changing the mix does not guarantee that the index increases in value over time. Plenty of periods of 10 years or more where the SP500 flatlined. Also, economies in other countries have extended periods where the index of their top companies flatlined. Further, the explosive growth which you hope to find is generally not in the SP500 companies. The explosive growth is what puts a company INTO the SP500.
- nemo44x 2y ago
  I don’t know - Apple joined awhile back and exploded and recently Nvidia.

erokar 2y ago

Yes, the S&P500 could in a sense be said to implement a momentum based trading strategy.

paxys 2y ago

The companies that compose the entire stock market also change all the time, and follow the same pattern (winners rise, losers go bankrupt). So the S&P 500 is still a good benchmark of overall stock market performance.

nemo44x 2y ago
So as long as innovation is outgrowing stagnation then returns should continue to outpace typical zero risk interest. In essence if you believe the stock market will fail to exhibit growth you’re betting against technological progress and productivity gains. Bad bet I’d say.
- kgwgk 2y ago
  > returns should continue to outpace typical zero risk interest. In essence if you believe the stock market will fail to exhibit growth Who are you arguing against? The paper linked talks about "significantly lower profit growth and stock returns in the future" not about decreasing earnings and negative returns.

tway_GdBRwW 2y ago

You are correct that even if the US stock market flatlines for the next 20 years, there will be individual companies which do extremely well, and others which die. That's not what this article is about. The article is about average corporate profits in the current-to-the-point-in-time largest US companies. And using the SP500 allows the analysis to be consistent even as the mix of the SP500 changes. And no, changing the mix does not guarantee that the index increases in value over time. Plenty of periods of 10 years or more where the SP500 flatlined. Also, economies in other countries have extended periods where the index of their top companies flatlined. Further, the explosive growth which you hope to find is generally not in the SP500 companies. The explosive growth is what puts a company INTO the SP500.

nemo44x 2y ago
I don’t know - Apple joined awhile back and exploded and recently Nvidia.