Why is the US stock market so lucrative?

[Anonymous]

Anonymous wrote:PP @ 13:47 isn't being accurate. German pensions are relatively to income higher than American social security.

Average US SS is about $2100/mo today. https://www.ssa.gov/faqs/en/questions/KA-01903.html

Average net German pension is €1150. Pensions are taxed. https://taxando.de/en/how-much-is-the-average-pension-in-germany-and-how-has-it-changed-over-the-years-check/

Many Americans, and the US stock market, in theory come out ahead, with much lower tax rates overall, along with effortless ways to invest in a 401k with an employer match.

It’s similar in France. I can’t attest to other EU countries.

[Anonymous]

Anonymous wrote:

Anonymous wrote:The lesson from U.S. markets is simple: Invest intelligently and consistently and prosper over the long term.

Stock market returns vary by time frame but the tendency is clear:
Past 10 years (2016 – 2025): 15.75%
Past 20 years (2006 – 2025): 12.39%
Past 30 years (1996 – 2025): 11.80%
Past 40 years (1986 – 2025): 12.74%.
S&P 500 historical performance: Since its inception in 1928, the index has averaged an 10.02% annual return. However, it wasn’t until 1957 that the index included 500 stocks. Since then, the average annual return has been 10.59%.
📌 Source: NYU Stern School of Business

Anyone can invest, those who don't or who choose speculation instead typically are the ones complaining about their poor financial positions. The U.S. markets create wealth and are accessible to anyone.

These are impressive numbers -- but how can average market returns be such much higher than average GDP growth? Curious for some insight on this issue from somebody with a deep background in economics.

Why do you think there needs to be a correlation? They reflect different things. Stock prices represent what companies are worth; GDP is the total market value of goods and services for a specific time period.

That said, GDP and the stock market generally move in the same direction over the long term, with rising GDP (economic growth) driving higher corporate earnings, increased consumer confidence, and bullish stock performance. However, they often diverge in the short term because the stock market is forward-looking and acts as a leading indicator, whereas GDP is backward-looking. They are not perfectly correlated. Stocks also demonstrate short term fluctuations, while GDP measurements can lag considerably.

[Anonymous]

It can be traced back to the Bretton woods institutions. The US was incredibly smart in being the lead architect of the world economy post WWII. We built a system that we are in full control off. We made our currency the world currency. We build the financial system on US technology.

We are also extremely spiteful. We will never expect a situation where the rest of the world prospers and we suffer. We will crash the entire system just so everyone goes down with us. Look at how some Americans take their angers on their innocent colleagues when laid off?

This is why we are a rich country. When a business signs a contract in Malawi, they would prefer the terms be in USD for stability. So the central bank in Malawi is obliged to hold a lot of USD.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We are a society of consumers and easy and cheap crecdit make it so everyone can be an uber-consumer. But it has its consequences.

"Average Balance: As of late 2025, the average cardholder carries a balance of approximately $6,700 to $7,900.

The "Revolving" Gap: For the roughly 49% of households that carry a balance from month to month, the average debt is much higher, sitting at $11,413 (up about 4% from the previous year)."

I got into this trap of easy credit. I had high credit limits after my divorce and ended up raking $65K of personal CC debt and then car loan on top of that. This is when I only make $60K/year. I need to get a second job because the interest is killing me. It is all my fault.

Self awareness is an amazing skill to have. Most people with your level of debt are not self aware of their own debt. Their debt keep climbing, but strangely enough they think it will mysteriously disappear.

Since you are self aware, start looking for a way out. There is always a way out.

Look into declaring personal BK

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:We are a society of consumers and easy and cheap crecdit make it so everyone can be an uber-consumer. But it has its consequences.

"Average Balance: As of late 2025, the average cardholder carries a balance of approximately $6,700 to $7,900.

The "Revolving" Gap: For the roughly 49% of households that carry a balance from month to month, the average debt is much higher, sitting at $11,413 (up about 4% from the previous year)."

I got into this trap of easy credit. I had high credit limits after my divorce and ended up raking $65K of personal CC debt and then car loan on top of that. This is when I only make $60K/year. I need to get a second job because the interest is killing me. It is all my fault.

Self awareness is an amazing skill to have. Most people with your level of debt are not self aware of their own debt. Their debt keep climbing, but strangely enough they think it will mysteriously disappear.

Since you are self aware, start looking for a way out. There is always a way out.

Look into declaring personal BK

That would be crazy for PP. She would end up losing everything and would have difficult time in getting any credit for next 10 years atleast. It is also a hit on people's self esteem.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The lesson from U.S. markets is simple: Invest intelligently and consistently and prosper over the long term.

Stock market returns vary by time frame but the tendency is clear:
Past 10 years (2016 – 2025): 15.75%
Past 20 years (2006 – 2025): 12.39%
Past 30 years (1996 – 2025): 11.80%
Past 40 years (1986 – 2025): 12.74%.
S&P 500 historical performance: Since its inception in 1928, the index has averaged an 10.02% annual return. However, it wasn’t until 1957 that the index included 500 stocks. Since then, the average annual return has been 10.59%.
📌 Source: NYU Stern School of Business

Anyone can invest, those who don't or who choose speculation instead typically are the ones complaining about their poor financial positions. The U.S. markets create wealth and are accessible to anyone.

These are impressive numbers -- but how can average market returns be such much higher than average GDP growth? Curious for some insight on this issue from somebody with a deep background in economics.

Why do you think there needs to be a correlation? They reflect different things. Stock prices represent what companies are worth; GDP is the total market value of goods and services for a specific time period.

That said, GDP and the stock market generally move in the same direction over the long term, with rising GDP (economic growth) driving higher corporate earnings, increased consumer confidence, and bullish stock performance. However, they often diverge in the short term because the stock market is forward-looking and acts as a leading indicator, whereas GDP is backward-looking. They are not perfectly correlated. Stocks also demonstrate short term fluctuations, while GDP measurements can lag considerably.

I'm not talking about year-to-year correlations. I'm talking about LONG TERM averages. How is that that the U.S. stock market has an avg return since 1950 of about 8% greater than inflation, while real GDP growth has averaged 2%? This trend -- if it continues -- would result in stock market capitalization being hundreds of times greater than the size of the economy. Does this seem plausible?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The lesson from U.S. markets is simple: Invest intelligently and consistently and prosper over the long term.

Stock market returns vary by time frame but the tendency is clear:
Past 10 years (2016 – 2025): 15.75%
Past 20 years (2006 – 2025): 12.39%
Past 30 years (1996 – 2025): 11.80%
Past 40 years (1986 – 2025): 12.74%.
S&P 500 historical performance: Since its inception in 1928, the index has averaged an 10.02% annual return. However, it wasn’t until 1957 that the index included 500 stocks. Since then, the average annual return has been 10.59%.
📌 Source: NYU Stern School of Business

Anyone can invest, those who don't or who choose speculation instead typically are the ones complaining about their poor financial positions. The U.S. markets create wealth and are accessible to anyone.

These are impressive numbers -- but how can average market returns be such much higher than average GDP growth? Curious for some insight on this issue from somebody with a deep background in economics.

Why do you think there needs to be a correlation? They reflect different things. Stock prices represent what companies are worth; GDP is the total market value of goods and services for a specific time period.

That said, GDP and the stock market generally move in the same direction over the long term, with rising GDP (economic growth) driving higher corporate earnings, increased consumer confidence, and bullish stock performance. However, they often diverge in the short term because the stock market is forward-looking and acts as a leading indicator, whereas GDP is backward-looking. They are not perfectly correlated. Stocks also demonstrate short term fluctuations, while GDP measurements can lag considerably.

I'm not talking about year-to-year correlations. I'm talking about LONG TERM averages. How is that that the U.S. stock market has an avg return since 1950 of about 8% greater than inflation, while real GDP growth has averaged 2%? This trend -- if it continues -- would result in stock market capitalization being hundreds of times greater than the size of the economy. Does this seem plausible?

Why not? You're presupposing that GDP and stock markets should have similar growth rates. There's no reason for that assumption. As stated upthread, they measure different things. The production of goods and services (GDP) is not related to company values (stock prices). Companies can be valuable without profits; investors look to anticipated future cash flow in those cases. Sometimes those cash flows materialize, and sometimes they don't. The stock market also represents only part of the economy, public companies. GDP includes small businesses and government spending. Stock values represent more than domestic economic output; stocks reflect corporate global earnings and investor sentiment, which are not considerations in GDP. Stock prices are also affected by things like stock repurchases, innovation, increased productivity, and other company-specific factors which have little to do with the broad economic factors reflected in GDP numbers.

Again, GDP and stock markets are different animals, and the divergence in their growth rates reflects that.

[Anonymous]

Basically it all comes down to corporate earnings and not GDP. Although they are related. That is why investors listen to earnings conference calls every 3 months. You get a health check on your investment with a free Q&A by informed analysts. And now with AI, you should see successful firms apply AI features to become more efficient and profitable. Also it is the frame work of the stock exchanges with the regulatory bodies and regs that give investors and business people confidence in US markets.

[Anonymous]

A little tangential but GDP does have lots of methodological assumptions in its measurements. And there is always tension when tracking statistics on maintaining tracking comparability vs. updating how measurements are collected and what they actually measure.

Inflation and political polling (which has suffered from the disappearance of phone landlines) are two areas that illustrate measurement issues.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The lesson from U.S. markets is simple: Invest intelligently and consistently and prosper over the long term.

Stock market returns vary by time frame but the tendency is clear:
Past 10 years (2016 – 2025): 15.75%
Past 20 years (2006 – 2025): 12.39%
Past 30 years (1996 – 2025): 11.80%
Past 40 years (1986 – 2025): 12.74%.
S&P 500 historical performance: Since its inception in 1928, the index has averaged an 10.02% annual return. However, it wasn’t until 1957 that the index included 500 stocks. Since then, the average annual return has been 10.59%.
📌 Source: NYU Stern School of Business

Anyone can invest, those who don't or who choose speculation instead typically are the ones complaining about their poor financial positions. The U.S. markets create wealth and are accessible to anyone.

These are impressive numbers -- but how can average market returns be such much higher than average GDP growth? Curious for some insight on this issue from somebody with a deep background in economics.

Why do you think there needs to be a correlation? They reflect different things. Stock prices represent what companies are worth; GDP is the total market value of goods and services for a specific time period.

That said, GDP and the stock market generally move in the same direction over the long term, with rising GDP (economic growth) driving higher corporate earnings, increased consumer confidence, and bullish stock performance. However, they often diverge in the short term because the stock market is forward-looking and acts as a leading indicator, whereas GDP is backward-looking. They are not perfectly correlated. Stocks also demonstrate short term fluctuations, while GDP measurements can lag considerably.

I'm not talking about year-to-year correlations. I'm talking about LONG TERM averages. How is that that the U.S. stock market has an avg return since 1950 of about 8% greater than inflation, while real GDP growth has averaged 2%? This trend -- if it continues -- would result in stock market capitalization being hundreds of times greater than the size of the economy. Does this seem plausible?

Yes it does. There is no economic concept or theory that ties these together over the long or short term.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:The lesson from U.S. markets is simple: Invest intelligently and consistently and prosper over the long term.

Stock market returns vary by time frame but the tendency is clear:
Past 10 years (2016 – 2025): 15.75%
Past 20 years (2006 – 2025): 12.39%
Past 30 years (1996 – 2025): 11.80%
Past 40 years (1986 – 2025): 12.74%.
S&P 500 historical performance: Since its inception in 1928, the index has averaged an 10.02% annual return. However, it wasn’t until 1957 that the index included 500 stocks. Since then, the average annual return has been 10.59%.
📌 Source: NYU Stern School of Business

Anyone can invest, those who don't or who choose speculation instead typically are the ones complaining about their poor financial positions. The U.S. markets create wealth and are accessible to anyone.

These are impressive numbers -- but how can average market returns be such much higher than average GDP growth? Curious for some insight on this issue from somebody with a deep background in economics.

Why do you think there needs to be a correlation? They reflect different things. Stock prices represent what companies are worth; GDP is the total market value of goods and services for a specific time period.

That said, GDP and the stock market generally move in the same direction over the long term, with rising GDP (economic growth) driving higher corporate earnings, increased consumer confidence, and bullish stock performance. However, they often diverge in the short term because the stock market is forward-looking and acts as a leading indicator, whereas GDP is backward-looking. They are not perfectly correlated. Stocks also demonstrate short term fluctuations, while GDP measurements can lag considerably.

I'm not talking about year-to-year correlations. I'm talking about LONG TERM averages. How is that that the U.S. stock market has an avg return since 1950 of about 8% greater than inflation, while real GDP growth has averaged 2%? This trend -- if it continues -- would result in stock market capitalization being hundreds of times greater than the size of the economy. Does this seem plausible?

Why not? You're presupposing that GDP and stock markets should have similar growth rates. There's no reason for that assumption. As stated upthread, they measure different things. The production of goods and services (GDP) is not related to company values (stock prices). Companies can be valuable without profits; investors look to anticipated future cash flow in those cases. Sometimes those cash flows materialize, and sometimes they don't. The stock market also represents only part of the economy, public companies. GDP includes small businesses and government spending. Stock values represent more than domestic economic output; stocks reflect corporate global earnings and investor sentiment, which are not considerations in GDP. Stock prices are also affected by things like stock repurchases, innovation, increased productivity, and other company-specific factors which have little to do with the broad economic factors reflected in GDP numbers.

Again, GDP and stock markets are different animals, and the divergence in their growth rates reflects that.

Good response

[Anonymous]

The S&P 500 Index has survivorship bias. Actual returns are less each year after 1950 by somewhere between .5 and 1 percent per AI.

[Anonymous]

It's inflation. The companies are worth the same or growing a little, but the dollar is worth less

And speculative hype about AI profits.