GDP

When we look back 100 years at the relationship between the size of the stock market and the underlying economic fundamentals either by way of gross domestic product (GDP) or the amount of “stuff” that corporations produce (Gross Value Added), there are two things we can learn. First, stocks tend to rise with economic output. Makes perfect sense. Corporations do well, people do well, the economy does well, stock prices go up. The second observation however, which is far more important to investor performance over time, is that stock prices tend to rise faster than economic output when times are…