Is the widely held belief that earnings growth powers long-term stock returns actually true? We investigate by analyzing the primary driver of equity returns over more than nine decades. (Q2 2023)
Written by 1623 Capital Senior Analyst JP Bennett, “What Drives Long-Term Stock Returns?” looks at the primary driver of equity returns from 1927-2021 according to three variables: earnings growth, inflation, and changes in valuation (sentiment).
JP analyzes how each of these variables contributes to the overall return of the stock market, and tests the hypothesis that earnings growth is what drives equity returns over time. The answer is not as straightforward as you might expect.
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