Is economic growth good for investors?

Economic growth and stock returns are not the same thing.

Expected growth is reflected in prices.

Unexpected growth is not predictable.

The highest growth countries and sectors don't have the highest stock returns.

This is one of the biggest misconceptions in investing.
------------------
Follow Ben Felix on

Follow the Rational Reminder on:

Follow PWL Capital on:

You can find the Rational Reminder podcast on
Google Podcasts:
Apple Podcasts:
Spotify Podcasts:
------------------

[MoneyMacro]

Great video Ben. Totally agree! I think you can add to this that the stock market might reflect a very small part of the economy, and this part of the economy might do better or worse than the economy. E.g. in South Africa, the stock market largely reflects commodities, not the economy.

[stonksdays]

The market is very efficient. Any piece of data outlying an expectation is already priced in. Betting against market efficiency is a losing game in the long run unless you can perfectly time the tail events that exceed expectations good or bad which is proven to be impossible. Bag hold globally diversified value or factor funds and DCA into them

[xortuge]

It s probably one off the biggest misconception i see all the time . Your work is as always « amazing »
Thank you

[everettminer]

Wow interesting! Loving the short content.

[DRC]

Graphs/data comparing GDP vs stock returns fail to account for the associated time lag. GDP is backward looking data, and stock values today are forward looking indicators

[mere_cat]

Love this! It applies on so many levels.

[BlindBison]

I’m still confused, apologies. But what if investors expect low growth or no growth? Wouldn’t that mean share prices go down? I’m just sort of confused about the part where you talk about expectations of investors pushing prices higher. Thanks for the video. I just DCA into VT and chill personally but I’d love to understand the relationship growth has to stock returns better.

If stock price is tied to company earnings aren’t those earnings lower if the economy is slowing down or population is decreasing?

[Duocek]

I don't understand the difference between economic growth and stock returns. Thought stock returns being higher meant economic growth

[colinp]

I'm confused. If economic growth isn't good for stocks, then why buy them? If the standard advice for long term investing is to buy low cost index funds, isn't that based on the assumption that while any given stock can be unpredictable, and stocks might fall across the board during occasional recessions, in general they will give positive returns over the long run because of... economic growth?

[AHMADbg]

How about on the long-term horizon (30+yrs)

[Jordan-dnse]

interesting. It's so counter intuitive but your explanation makes sense. perhaps I should invest in low growth countries!? 😃

[asliceofloaf]

Its simple, when you invest, you get money for literally free :)))
Its not like you leech value away from consumers or working class citizens with each "free effortless dollar" you :)

Its okay, as long ws everyone invests, everyone will be able to reap this free money and society will be great :)