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remember though that GDP and stock market growth are two different measurements
  1.  GDP is more of a "revenue type" measurement, while stock market growth correlates more directly with earnings per share, which is a "profit type measure.
  2.  Stock markets measure profit results of publicly traded companies.  Government spending is I believe about 1/3 of the GDP, and of course 0% of the stock market.  And also private firms are not included in stock market performance.
  3.  GDP is of more of a domestic number (in the sense that the government doesn't really export, and smaller private firms would likely export at lower levels, while many of the firms on the stock market are very global.
I think there is logic that supports GDP growing slower than the market. Some examples,
  1.  I don't immediately have the % of S&P 500 overseas sales, but just from memory 20 years ago 20% overeas sales for a company were considered high, whereas today, 50% is not at all abnormal.  so overseas growth would add more to stock market growth than it does to GDP, particularly since we import more than we export.
  2.  IMHO, there is more of a growth motivation in the companies in the public stock markets, than there is in the government sector.
  3.  our public companies have gravitated to higher profitiability and growth sectors over time.  The governement can't really gravitate to faster growth sectors.  The move to financial services in the US is not only a move to a faster growth segment, but also a higher profit segment, and of course that all gets capitalized and discounted in the stock market.

just a few off the top of my head thoughts as to why they are different, and why I would expect the market to grow faster due to some of the differences.
by wchurchill on Mon Mar 26th, 2007 at 04:33:31 PM EST
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