It's a nice graph, I think the most well known one is in "Stocks for the long run" [0]
I'm more concerned how it will grow over the next n (lets say 50) years.
Somehow, it doesn't really fit into my head that there will be another 7 doublings of money invested stock market over the coming 50 years (as others have commented, 10% annually is doubling every 7 years).
Reality is complex of course, there's inflation, there's taxes, dividends don't grow the stock market cap.
Still, I would assume less growth due to several factors. The last few decades have seen several tailwinds that can't repeat in the same way:
- falling corporate tax rates globally [1]
- falling interest rates [2] (since 1980, until 2020)
- rising P/E ratios (partly in response to falling interest rates) [3]
- demographic expansion [4]
- improvements in diversification (index funds, theoretically you need a lower risk premium than when investing in individual stocks)
And I'm not sure that headwinds coming from environmental degradation of many types are already priced in.
I still think that stocks will do better than bonds (there's a risk premium [5], those are real assets, there's innovation and growth), just be cautious about assuming that the future will mirror the past.
[0] https://en.wikipedia.org/wiki/Stocks_for_the_Long_Run
[1] https://taxfoundation.org/data/all/global/corporate-tax-rate...
[2] https://fred.stlouisfed.org/series/DGS10 (choose max in the time scale)
[3] https://www.multpl.com/s-p-500-pe-ratio
[4] https://en.wikipedia.org/wiki/World_population
[5] https://pages.stern.nyu.edu/~adamodar/ ERP currently at about 4.4%
I'm more concerned how it will grow over the next n (lets say 50) years.
Somehow, it doesn't really fit into my head that there will be another 7 doublings of money invested stock market over the coming 50 years (as others have commented, 10% annually is doubling every 7 years).
Reality is complex of course, there's inflation, there's taxes, dividends don't grow the stock market cap.
Still, I would assume less growth due to several factors. The last few decades have seen several tailwinds that can't repeat in the same way:
- falling corporate tax rates globally [1]
- falling interest rates [2] (since 1980, until 2020)
- rising P/E ratios (partly in response to falling interest rates) [3]
- demographic expansion [4]
- improvements in diversification (index funds, theoretically you need a lower risk premium than when investing in individual stocks)
And I'm not sure that headwinds coming from environmental degradation of many types are already priced in.
I still think that stocks will do better than bonds (there's a risk premium [5], those are real assets, there's innovation and growth), just be cautious about assuming that the future will mirror the past.
[0] https://en.wikipedia.org/wiki/Stocks_for_the_Long_Run
[1] https://taxfoundation.org/data/all/global/corporate-tax-rate...
[2] https://fred.stlouisfed.org/series/DGS10 (choose max in the time scale)
[3] https://www.multpl.com/s-p-500-pe-ratio
[4] https://en.wikipedia.org/wiki/World_population
[5] https://pages.stern.nyu.edu/~adamodar/ ERP currently at about 4.4%