…monthly moves in stock prices are essentially meaningless. The long-term trend of U.S. stock returns has been about 10% annually (with considerable year-to-year variation), and despite a multitude of changing economic and political conditions in the past and likely in the future, there is no reason to think future long-term returns will be much different. The reason is that long-term stock returns are driven much more by the relatively steady advancement of science, medicine, innovation and entrepreneurship, and not nearly as much by economic cycles or politics. Yet the daily news is dominated by stories concerning economic cycles and politics rather than innovation and entrepreneurship, so we conclude that you shouldn’t expect to become a successful investor by watching or reading the daily news.
Mar 2015