US stock market lean decade ago? Financial mathematical facts show that returns for investors could decline in the future!

US stock market lean decade ago? Financial mathematical facts show that returns for investors could decline in the future!

According to a report from finanzmarktwelt.de, US stock markets may be facing a lean decade. The financial crisis and government intervention have led to rampant inflation and unexpectedly high returns for the stock markets. Even if investors expect that this could continue, there are critical thoughts about this expectation.

The return on the S&P 500 global index has risen well above the long-term 10 percent per year since 2009. In financial mathematical terms, this jump in returns is a gigantic difference that can be attributed to the compound interest or “compounding” effect. Companies' profits have grown at a significantly lower rate compared to the price increases on the stock markets since the Second World War. This increase in yields is mainly attributed to huge share buybacks and government measures.

U.S. debt has already reached concerning levels, which could impact future stock market returns. An austerity policy could inevitably reduce the returns of the stock markets, as previous performance has been artificially influenced by government debt programs and the cheapening of interest rates. This could lead to a financial normalization, as the US may no longer be able to maintain its current ratio in the global stock market in the medium or longer term.

The prospects for the US stock markets in the next few years could therefore become somewhat cloudy, as the extreme returns to date cannot be attributed to permanent factors. It is therefore appropriate to have realistic expectations in view of the financial-mathematical conditionality. It remains to be seen how developments in the US and global financial markets will develop in the coming years.