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.
It's also worth noting that's US stocks. The story in Europe or Argentina would be completely different, and there was no way to figure that out in 1920.
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%