Investors seem to over-emphasise the relationship between economic growth and share price growth
Investors seem to over-emphasise the relationship between economic growth and share price growth. There is little doubt that GDP growth has an impact of corporate revenue growth, but how this flows through to share prices depends on many factors including input costs, labour costs, exchange rates, interest rates, valuations and so on. At present, market valuations are not stretched being around their historic average, but this means that the easy gains have been had this cycle. From now on, the gains are likely to reflect the outlook for earnings growth and cost management here still remains important, but revenue growth is likely to the key statistic for companies which outperform the market average. This is what investors need to be focused on regardless of which market they are looking at. (VIEW LINK)
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