With a bit of googling:
- S&P 500 growth/stock market growth real return over the last 100 years is around 6.5%
- Real global GDP growth has been around 4% https://www.forbes.com/sites/rickferri/2012/10/25/a-second-look-at-pe-ratios-part-ii/#2b2ae6328027
- Corporate profits have generally tracked long term with global GDP growth.
- Current PE ratio is higher than usual, but not 2.5% a year over 50 years high (24 current vs 16 average)
I'm not trying to be the smartest guy in the room, but I was doing some research to try and understand if, long term, stocks are fundamentally overvalued. What I instead found was math that just didn't fundamentally make sense to me (see above). What am I missing? Why are the PE ratios not astronomical with that kind of disconnect between GDP growth and stock returns? Also, on a related note to my original query, how does the math work out that stock returns can forever be higher than GDP growth?
Submitted April 30, 2018 at 01:45PM by MUTiggers https://ift.tt/2w1fop1
