Wednesday, March 20, 2013

A thought about the stock market and the economy

Source of graph

Stocks tended to increase in value when total stock market capital was a relatively small portion of GDP. Bubbles in the last years of the 20th century and the last part of the last decade saw market capitalization as 100% or more of GDP. I suppose stock prices are high today because interest rates are very low. One wonders whether a bull market will continue, and whether earnings of companies can in the future justify the high prices of stocks.

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