Saturday, November 21, 2015

031. GDP Growth, Dividend Yield and Expected Returns

The expected return on investment of a portfolio of U.S. stocks ix correlated with GDP growth. An examination of indicators since 1970 shows that when GDP growth peaks at 10.9% in 1980, the expected return on investment reaches a top at 26.9% while dividends reach 5.68%.

Descending from 1978 GDP growth has declined to 3.2% in 2015 while the expected return on investment has becomes negative and presently hovers at 0.2% while dividends remain at 2%.

A retired senior investor can view these indicators as signs that materially deteriorated investment conditions have prevailed since 1978.

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