Earnings Growth Compared To Market Returns

In theory, the S&P 500 should rise in line with earnings. In practice  this does not happen.

While this comes as no surprise, the scale of the difference is astounding.

Period
Earnings Growth
S&P 500 Returns
2003-2013
148%
68%
1993-2003
16%
137%
1983-1993
5%
179%

Across three decades the date shows that the S&P 500 has almost no correlation to earnings growth. The current period, 2003 to 2013 has seen the fastest earnings growth but the slowest S&P 500 growth.

However, the period of 1983 to 1993 saw earnings only grow a measly 5%, while the S&P 500 expanded 179%.

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