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Correlation between US economic growth and investment returns
Old 08-27-2014, 06:56 PM   #1
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Correlation between US economic growth and investment returns

Saw on this evenings news where the CBO is predicting 3.5% economic growth for both 2015 and 2016.

Which got me wondering - how do you think 3.5% economic growth will correlate into investment growth and returns?

From the limited research I've been able to do, it seems that investment growth contributes to economic growth, but economic growth doesn't necessarily contribute to investment growth?
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Old 08-31-2014, 06:14 AM   #2
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Correct.

Economic growth = more wealth.

How much of that wealth goes to the capitalist owners (that's us) is an entirely different animal.

It does correlate obviously, but not nearly as much as one would expect.
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Old 08-31-2014, 08:09 AM   #3
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The expected economic growth is already reflected in stock prices. If the growth exceeds expectations, stock prices will (probably) go up. If it lags expectations, stock prices will (probably) go down.
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Old 08-31-2014, 12:39 PM   #4
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I suspect investment values are fairly strongly determined by the economy in the long run. Hence my confidence in mean reversion. Investment growth may look random, but economic growth is much smoother. The wilder investment swings reflect short-term concerns and emotions, something long-term investors can take advantage of or ignore.
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Old 09-01-2014, 06:56 AM   #5
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Quote:
Originally Posted by Animorph View Post
The wilder investment swings reflect short-term concerns and emotions, something long-term investors can take advantage of or ignore.
The wilder investment swings reflect short-term concerns and emotions, something long-term investors can take advantage of, get burned by, or ignore.

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