Stock Market Philosophy and Theory: Why does it grow so consistently in the...

[Kevin S]

...long-term? It's no secret that the market grows at a 10% rate (long term) remarkably consistently. It is not on the same level as the economy or inflation, which have been far less (Inflation approximately 3-4%, I'm not certain on GDP but my guess is about 5-6%) What is the explanation of this phenomenon? Here are a few of my own theories:

Investors got used to early growth, which is now established in the minds of new investors, who buy stocks and maintain it.

Stocks generally considered the best investment, so it attracts the most investors.

Popularity - started with the rich, then is slowly becoming more popular with the citizens (beginning majorly in the 1920s), and continuing now with online stock trading. The spread of technology, phones, tv, etc., would also explain this.

Population, inflation, and GDP. Population growth, inflation, and overall economy growth all contribute to the market, which sustain it at these rates.

Combination of some of these, or perhaps other theories.
Company growth has little to do with overall stock market growth. Graph the S&P 500 vs. the P/E. Goes up, way up! The market is growing faster than the economy, which also means company earnings...

What is the real reason, in your opinion?

[jeff b]

stocks are based on companies and their growth or decline.
The value of a stock is dependent on the profit margins of the company. Corporate America has been fairly cut-throat for several decades now... finding ways to keep people spending money on their stuff... making products fail after a year or two, coming out with new products to replace them...
Releasing products in a series of improvements to take advantage of the impulsive consumer... instead of making a good product from the start...
Yeah good companies to invest in are the ones that have sound business growth and low cause for unexpected expense (like outdated equipment and buildings that will eventually lead to expensive renovation or upgrading to new facilities...)