This paper and blog post provides some incredibly interesting data on past market returns as well as the potential implications for the global economic future.
Full Paper: http://www.epge.fr/wp-content/uploads/2020/09/The-age-of-disorder.pdf
Blog Post breaking down the part specific to the stock market : https://awealthofcommonsense.com/2021/05/200-years-of-asset-class-returns/
The full table of returns: https://imgur.com/gallery/uWdoVFd
There's so much to this 75-page paper that it's honestly hard to generate a full hypothesis on what this means for the future, as much is concluded within the paper itself which I have only started reading myself. Regardless, I agree firmly with the final conclusions drawn in the blog post regarding the asset class returns. Specific takeaways well worth as a reminder if nothing else:
Short-term returns for the stock market can be highly unpredictable and unstable. Long-term returns for the stock market have been far more stable. While real returns have been elevated for the past 5 and 10 years, there isn’t much of a difference between returns over 15, 25, 50, 75, 100, 150 or 200 years.
This is comforting even if future returns are promised to no one.
It’s also a good reminder that the high returns in the current cycle won’t last forever. You can’t set your iPhone to it but eventually higher than average returns will be followed by lower than average returns...
...While gross returns will likely be lower, net returns should be higher for those who are able to avoid behavioral mistakes.
The biggest threat to long-term returns is your behavior in the short-term
Page 43 goes into large-cap stocks moreso, stating in part...
...Due to their size and power, the large growth stocks are attracting the glare of politicians and regulators across the globe. Pressure is building for a digital tax and/ or a break up to dilute their market share. In particular, a globally coordinated effort is under way, led by the OECD. It plans to reset the global corporate tax system such that companies will have to pay based on where they have activities, and minimum tax rates will apply. In effect, this will cut the incentive for companies to base their headquarters in low-tax jurisdictions. The US, however, is opposed to such a digital tax, which would have a big effect on US companies. With global tax forces pushing in one direction and the US opposing them, yet acting on competition concerns, the stage looks set for a reckoning for mega-cap growth stocks. Given their ubiquity throughout the fabric of life around the world, it seems likely that a sudden bout of disorder could shake not only companies and stock markets but also how we live our lives.
Now, let's digest this fantastic paper together!
Submitted June 08, 2021 at 01:02AM by _FFA https://ift.tt/3x83lRo
