Don't Confuse the Economy with the Stock Market
Here are a couple of paragraphs from Unexpected Returns that highlight the importance of being careful not to confuse the economy with the stock market.
Economic Growth and Stock Market Returns
The lack of correlation between economic growth and stock market returns for extended periods of time surprises most investors. Real growth in the economy and in earnings per share (EPS) averaged virtually the same rate from the mid-1960s to the early 1980s as from the early 1980s through 1999. While real economic growth was remarkably consistent over the two secular cycles, stock market returns differed dramatically.
Despite substantial growth in both the economy and earnings from 1965-1981, the market ended at the same level at which it had begun sixteen years earlier. By contrast, 1982-1999, a period of lower nominal economic and EPS growth, saw the market soar more than tenfold to produce one of the greatest bull markets in history. An investment of $100,000 in the S&P 500 in 1982 was worth well over $1 million by the end of 1999.
- Hussman Weekly Market Comment: It Is Informed Optimism To Wait For The Rain
Link to: It Is Informed Optimism To Wait For The RainBased on valuation metrics that have demonstrated a near-90% correlation with subsequent 10-year S&P 500 total returns, not only historically but also in recent decades, we estimate that U.S. equities...
- Richard Duncan Quotes
Another longer excerpt from The New Depression (taken from my Kindle highlights, so the excerpts aren’t necessarily the paragraphs I have put them in below, and there may be things in between that I didn’t highlight). I've been posting a lot of...
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Factoring in a 4% Q4 growth rate, the U.S. economy expanded by 3% in real terms from the 4th quarter of 2009 through the 4th quarter of 2010. Despite this rise in GDP, the unemployment rate remained stubbornly high at 9.6% in the last quarter of 2010,...
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The industrial sector has been seeing large declines so far through 2015 due to varied reasons: a strong US dollar is hurting the large multinationals, interest rate hikes, China's economy slowing, potentially another recession in the works. Pick...
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When volatility in the markets increases that leads many investors to look for defensive investments that will hold up during a market downturn. Consumer staples are some of the best options when it comes to holding up in a declining market as well as...