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2021-06-05

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The S&P 500 would be below 1,600 without these 3 pillars and those supports are now weakening<blockquote>如果没有这三大支柱，标普500将低于1,600点，而这些支撑现在正在减弱</blockquote>

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{"i18n":{"language":"zh_CN"},"detailType":1,"isChannel":false,"data":{"magic":2,"id":112657072,"tweetId":"112657072","gmtCreate":1622868412096,"gmtModify":1634097182316,"author":{"id":3575231727264140,"idStr":"3575231727264140","authorId":3575231727264140,"authorIdStr":"3575231727264140","name":"keew","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"userType":1,"introduction":"","boolIsFan":false,"boolIsHead":false,"crmLevel":11,"crmLevelSwitch":0,"individualDisplayBadges":[],"fanSize":5,"starInvestorFlag":false},"themes":[],"images":[],"coverImages":[],"extraTitle":"","html":"<html><head></head><body>Please like and comment. Thanks</body></html>","htmlText":"<html><head></head><body>Please like and comment. Thanks</body></html>","text":"Please like and comment. Thanks","highlighted":1,"essential":1,"paper":1,"likeSize":3,"commentSize":3,"repostSize":0,"favoriteSize":0,"link":"https://laohu8.com/post/112657072","repostId":1162130057,"repostType":4,"repost":{"id":"1162130057","kind":"news","pubTimestamp":1622862397,"share":"https://www.laohu8.com/m/news/1162130057?lang=zh_CN&edition=full","pubTime":"2021-06-05 11:06","market":"us","language":"en","title":"The S&P 500 would be below 1,600 without these 3 pillars and those supports are now weakening<blockquote>如果没有这三大支柱，标普500将低于1,600点，而这些支撑现在正在减弱</blockquote>","url":"https://stock-news.laohu8.com/highlight/detail?id=1162130057","media":"MarketWatch","summary":"Investors may need to consider private equity to capture the returns that publicly traded stocks hav","content":"Investors may need to consider private equity to capture the returns that publicly traded stocks have provided<blockquote>投资者可能需要考虑私募股权来获取公开交易股票提供的回报</blockquote> <img src=\"https://static.tigerbbs.com/ab21eb0dc365f342dd26c49af9020305\" tg-width=\"1260\" tg-height=\"840\">GETTY IMAGES<blockquote>盖蒂图片</blockquote> Stock prices can’t indefinitely grow faster than the economy. This provides a crucial reality check for U.S. stock-market bulls, many of whom believe stocks can continue outperforming the U.S. economy in perpetuity. Over the past decade, for example, the S&amp;P 500SPX,+0.88%on an inflation-adjusted total-return basis has outperformed real U.S. GDP by an annualized margin of 11.9% to 2.0%.<blockquote>股价不可能无限期地快于经济增长。这为美国股市多头提供了一个至关重要的现实检验，他们中的许多人认为股市可以永远跑赢美国经济。例如，在过去十年中，标准普尔500SPX指数（经通胀调整后的总回报率为+0.88%）的表现优于美国实际GDP，年化幅度为11.9%至2.0%。</blockquote> Going forward, it could be the other way around, according to an argument advanced some years ago by Robert Arnott, founder of&nbsp;Research Affiliates, and William Bernstein, co-principal at&nbsp;Efficient Frontier Advisors. They pointed out that a portion of economic growth is attributable to non-public companies, such as startups and the like — a category they refer to as “entrepreneurial capitalism.”<blockquote>根据Research Affiliates创始人罗伯特·阿诺特(Robert Arnott)和Efficient Frontier Advisors联席负责人威廉·伯恩斯坦(William Bernstein)几年前提出的观点，展望未来，情况可能会恰恰相反。他们指出，经济增长的一部分归功于非上市公司，如初创公司等——他们将这一类别称为“创业资本主义”。</blockquote> By definition, economic growth that non-public companies generate will not show up in the stock market— which only reflects the performance of publicly traded corporations. Arnott and Bernstein estimate that share prices historically have grown about two annualized percentage points slower than the overall economy.<blockquote>根据定义，非上市公司产生的经济增长不会出现在股票市场上——股票市场只反映上市公司的表现。阿诺特和伯恩斯坦估计，历史上股价的年化增长速度比整体经济慢约两个百分点。</blockquote> Such slippage has dire implications for the U.S. stock market’s future return. But I want to first discuss why the stock market’s stunning performance over the past decade was not due to economic growth. Instead, the bulk of that performance was due to three factors:<blockquote>这种下滑对美国股市未来的回报产生了可怕的影响。但我想首先讨论一下，为什么过去十年股市的惊人表现不是因为经济增长。相反，这一表现主要归功于三个因素：</blockquote> <ul> <li>Valuation changes: The S&amp;P 500’s price/earnings ratio has doubled over the past decade.</li> <li>Increasing profit margins: The S&amp;P 500’s operating margin over the past four quarters has averaged nearly two percentage points higher than it was a decade ago, according to data from Howard Silverblatt, senior index analyst at S&amp;P Dow Jones Indices.</li> <li>Net buybacks: Over the past decade corporations have repurchased more shares than new shares they have issued. This has reduced the number of shares outstanding, and increased earnings per share.</li> </ul> To appreciate the impact of these three factors, consider that the S&amp;P 500 now would trade below 1,600 if there had been no change at all over the past decade with each of these three dimensions. While the chance of such a perfect storm is so low that you might be inclined to dismiss it out of hand, Bernstein said in an interview that he wouldn’t discount the possibility.<blockquote><ul><li>估值变化：标普500的市盈率在过去十年翻了一番。</li><li>利润率不断提高：根据标普道琼斯指数高级指数分析师Howard Silverblatt的数据，标普500过去四个季度的营业利润率平均比十年前高出近两个百分点。</li><li>净回购：在过去十年中，企业回购的股票多于其发行的新股。这减少了流通股数量，增加了每股收益。</li></ul>为了理解这三个因素的影响，请考虑一下，如果这三个维度在过去十年中没有任何变化，标普500现在的交易价格将低于1,600点。虽然这种完美风暴的可能性如此之低，以至于你可能会倾向于立即忽视它，但伯恩斯坦在接受采访时表示，他不会忽视这种可能性。</blockquote> Projecting the future<blockquote>预测未来</blockquote> The picture this analysis paints about the U.S. stock market’s future isn’t pretty, assuming the U.S. economy grows at the same pace over the next decade as the last. In that case, the only way the market can produce annualized returns greater than the low single-digits is for the P/E ratio and profit margins to continue rising or for net buybacks to continue reducing the number of shares outstanding — or for some combination of these three factors to occur.<blockquote>假设美国经济在未来十年以与上一个十年相同的速度增长，这份分析描绘的美国股市未来的图景并不美好。在这种情况下，市场能够产生高于低个位数的年化回报的唯一方法是市盈率和利润率继续上升，或者净回购继续减少已发行股票数量——或者这三个因素的某种组合。</blockquote> More likely, these three tailwinds will become headwinds. P/E ratios&nbsp;already are at or near the high end of their historical distribution, and they can’t go up forever. Profit margins also are at or near record levels and,as I argued earlier this week, there are good reasons to expect those margins to decline in coming years. While it’s possible that buybacks will outpace share issuance in coming years, that’s hardly a sure bet. Over the past 12 months, for example, there have been negative net buybacks — i.e. more shares have been issued than repurchased. In fact, Arnott pointed out in an email, for most of U.S. stock market history net buybacks have been negative.<blockquote>更有可能的是，这三个顺风会变成逆风。市盈率已经处于或接近历史分布的高端，而且不可能永远上升。利润率也处于或接近创纪录水平，正如我本周早些时候所说，有充分的理由预计这些利润率在未来几年将下降。虽然未来几年回购可能会超过股票发行，但这并不是一个确定的赌注。例如，在过去12个月中，净回购为负，即发行的股票多于回购的股票。事实上，阿诺特在一封电子邮件中指出，在美国股市历史的大部分时间里，净回购都是负数。</blockquote> One can also wonder if an even-greater share of economic growth in coming years will accrue to non-public equity. Andrew Karolyi, dean of Cornell University’s SC Johnson College of Business, said in an interview that private equity now plays a much bigger role than in the past. One possible future, he said, is that the growth of the public stock market lags that of the overall economy by an increasing amount.<blockquote>人们还可能想知道，未来几年，非公募股权是否会在经济增长中占据更大的份额。康奈尔大学SC Johnson商学院院长Andrew Karolyi在接受采访时表示，私募股权现在发挥的作用比过去大得多。他说，一个可能的未来是，公开股票市场的增长越来越落后于整体经济。</blockquote> One measure of the declining economic importance of the public corporation is the decreasing number of publicly traded companies, as reflected in the chart below. This decline has been overlooked by many on Wall Street, given their focus on the red-hot IPO market. But, as Karolyi pointed out, even as more companies are coming to market, there have also been an increasing number of delistings.<blockquote>上市公司经济重要性下降的一个衡量标准是上市公司数量的减少，如下图所示。鉴于华尔街的许多人专注于炙手可热的IPO市场，这种下降被他们忽视了。但是，正如卡罗利指出的那样，尽管越来越多的公司上市，但退市的数量也在增加。</blockquote> <img src=\"https://static.tigerbbs.com/3de45fd68cb24b2bdf2791d1f6b9fac0\" tg-width=\"1260\" tg-height=\"922\"><blockquote></blockquote> For example, according to Refinitiv, through the end of May 2021 there was more than $1.6 trillion in domestic M&amp;A activity, almost 50% higher than the previous calendar year that held the record for the most M&amp;A activity for the first five months. We need to focus on both IPOs and delistings, Karolyi argued, just as demographers can only analyze population trends by focusing on births and deaths.<blockquote>例如，根据路孚特的数据，截至2021年5月底，国内M&amp;A活动超过1.6万亿美元，比保持前五个月M&amp;A活动最多记录的上一年高出近50%。卡罗利认为，我们需要同时关注IPO和退市，就像人口学家只能通过关注出生和死亡来分析人口趋势一样。</blockquote> “The role of publicly traded corporations in the overall economy may be changing,” Karolyi said. Their possible life cycle paths are expanding to include many that don’t end in becoming publicly traded, for example, or waiting much longer before doing so. Given the abundant liquidity in the private equity market, he added, it may very well become the preferred exit strategy for many companies that previously would have gone public.<blockquote>“上市公司在整体经济中的作用可能正在发生变化，”卡罗利说。例如，它们可能的生命周期路径正在扩大，包括许多不会以公开交易或等待更长时间才能公开交易而告终的公司。他补充说，鉴于私募股权市场流动性充裕，这很可能成为许多此前上市公司的首选退出策略。</blockquote> The bottom line? The past decade was extraordinary for publicly traded U.S. stocks. Don’t expect that to continue indefinitely.<blockquote>底线？过去十年对于公开交易的美国股票来说是不平凡的。不要指望这种情况会无限期地持续下去。</blockquote>","source":"lsy1603348471595","collect":0,"html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>The S&P 500 would be below 1,600 without these 3 pillars and those supports are now weakening<blockquote>如果没有这三大支柱，标普500将低于1,600点，而这些支撑现在正在减弱</blockquote></title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 12.5px; color: #7E829C; margin: 0;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nThe S&P 500 would be below 1,600 without these 3 pillars and those supports are now weakening<blockquote>如果没有这三大支柱，标普500将低于1,600点，而这些支撑现在正在减弱</blockquote>\n</h2>\n<h4 class=\"meta\">\n\nMarketWatch2021-06-05 11:06\n\n</h4>\n</header>\n<article>\nInvestors may need to consider private equity to capture the returns that publicly traded stocks have provided<blockquote>投资者可能需要考虑私募股权来获取公开交易股票提供的回报</blockquote> <img src=\"https://static.tigerbbs.com/ab21eb0dc365f342dd26c49af9020305\" tg-width=\"1260\" tg-height=\"840\">GETTY IMAGES<blockquote>盖蒂图片</blockquote> Stock prices can’t indefinitely grow faster than the economy. This provides a crucial reality check for U.S. stock-market bulls, many of whom believe stocks can continue outperforming the U.S. economy in perpetuity. Over the past decade, for example, the S&amp;P 500SPX,+0.88%on an inflation-adjusted total-return basis has outperformed real U.S. GDP by an annualized margin of 11.9% to 2.0%.<blockquote>股价不可能无限期地快于经济增长。这为美国股市多头提供了一个至关重要的现实检验，他们中的许多人认为股市可以永远跑赢美国经济。例如，在过去十年中，标准普尔500SPX指数（经通胀调整后的总回报率为+0.88%）的表现优于美国实际GDP，年化幅度为11.9%至2.0%。</blockquote> Going forward, it could be the other way around, according to an argument advanced some years ago by Robert Arnott, founder of&nbsp;Research Affiliates, and William Bernstein, co-principal at&nbsp;Efficient Frontier Advisors. They pointed out that a portion of economic growth is attributable to non-public companies, such as startups and the like — a category they refer to as “entrepreneurial capitalism.”<blockquote>根据Research Affiliates创始人罗伯特·阿诺特(Robert Arnott)和Efficient Frontier Advisors联席负责人威廉·伯恩斯坦(William Bernstein)几年前提出的观点，展望未来，情况可能会恰恰相反。他们指出，经济增长的一部分归功于非上市公司，如初创公司等——他们将这一类别称为“创业资本主义”。</blockquote> By definition, economic growth that non-public companies generate will not show up in the stock market— which only reflects the performance of publicly traded corporations. Arnott and Bernstein estimate that share prices historically have grown about two annualized percentage points slower than the overall economy.<blockquote>根据定义，非上市公司产生的经济增长不会出现在股票市场上——股票市场只反映上市公司的表现。阿诺特和伯恩斯坦估计，历史上股价的年化增长速度比整体经济慢约两个百分点。</blockquote> Such slippage has dire implications for the U.S. stock market’s future return. But I want to first discuss why the stock market’s stunning performance over the past decade was not due to economic growth. Instead, the bulk of that performance was due to three factors:<blockquote>这种下滑对美国股市未来的回报产生了可怕的影响。但我想首先讨论一下，为什么过去十年股市的惊人表现不是因为经济增长。相反，这一表现主要归功于三个因素：</blockquote> <ul> <li>Valuation changes: The S&amp;P 500’s price/earnings ratio has doubled over the past decade.</li> <li>Increasing profit margins: The S&amp;P 500’s operating margin over the past four quarters has averaged nearly two percentage points higher than it was a decade ago, according to data from Howard Silverblatt, senior index analyst at S&amp;P Dow Jones Indices.</li> <li>Net buybacks: Over the past decade corporations have repurchased more shares than new shares they have issued. This has reduced the number of shares outstanding, and increased earnings per share.</li> </ul> To appreciate the impact of these three factors, consider that the S&amp;P 500 now would trade below 1,600 if there had been no change at all over the past decade with each of these three dimensions. While the chance of such a perfect storm is so low that you might be inclined to dismiss it out of hand, Bernstein said in an interview that he wouldn’t discount the possibility.<blockquote><ul><li>估值变化：标普500的市盈率在过去十年翻了一番。</li><li>利润率不断提高：根据标普道琼斯指数高级指数分析师Howard Silverblatt的数据，标普500过去四个季度的营业利润率平均比十年前高出近两个百分点。</li><li>净回购：在过去十年中，企业回购的股票多于其发行的新股。这减少了流通股数量，增加了每股收益。</li></ul>为了理解这三个因素的影响，请考虑一下，如果这三个维度在过去十年中没有任何变化，标普500现在的交易价格将低于1,600点。虽然这种完美风暴的可能性如此之低，以至于你可能会倾向于立即忽视它，但伯恩斯坦在接受采访时表示，他不会忽视这种可能性。</blockquote> Projecting the future<blockquote>预测未来</blockquote> The picture this analysis paints about the U.S. stock market’s future isn’t pretty, assuming the U.S. economy grows at the same pace over the next decade as the last. In that case, the only way the market can produce annualized returns greater than the low single-digits is for the P/E ratio and profit margins to continue rising or for net buybacks to continue reducing the number of shares outstanding — or for some combination of these three factors to occur.<blockquote>假设美国经济在未来十年以与上一个十年相同的速度增长，这份分析描绘的美国股市未来的图景并不美好。在这种情况下，市场能够产生高于低个位数的年化回报的唯一方法是市盈率和利润率继续上升，或者净回购继续减少已发行股票数量——或者这三个因素的某种组合。</blockquote> More likely, these three tailwinds will become headwinds. P/E ratios&nbsp;already are at or near the high end of their historical distribution, and they can’t go up forever. Profit margins also are at or near record levels and,as I argued earlier this week, there are good reasons to expect those margins to decline in coming years. While it’s possible that buybacks will outpace share issuance in coming years, that’s hardly a sure bet. Over the past 12 months, for example, there have been negative net buybacks — i.e. more shares have been issued than repurchased. In fact, Arnott pointed out in an email, for most of U.S. stock market history net buybacks have been negative.<blockquote>更有可能的是，这三个顺风会变成逆风。市盈率已经处于或接近历史分布的高端，而且不可能永远上升。利润率也处于或接近创纪录水平，正如我本周早些时候所说，有充分的理由预计这些利润率在未来几年将下降。虽然未来几年回购可能会超过股票发行，但这并不是一个确定的赌注。例如，在过去12个月中，净回购为负，即发行的股票多于回购的股票。事实上，阿诺特在一封电子邮件中指出，在美国股市历史的大部分时间里，净回购都是负数。</blockquote> One can also wonder if an even-greater share of economic growth in coming years will accrue to non-public equity. Andrew Karolyi, dean of Cornell University’s SC Johnson College of Business, said in an interview that private equity now plays a much bigger role than in the past. One possible future, he said, is that the growth of the public stock market lags that of the overall economy by an increasing amount.<blockquote>人们还可能想知道，未来几年，非公募股权是否会在经济增长中占据更大的份额。康奈尔大学SC Johnson商学院院长Andrew Karolyi在接受采访时表示，私募股权现在发挥的作用比过去大得多。他说，一个可能的未来是，公开股票市场的增长越来越落后于整体经济。</blockquote> One measure of the declining economic importance of the public corporation is the decreasing number of publicly traded companies, as reflected in the chart below. This decline has been overlooked by many on Wall Street, given their focus on the red-hot IPO market. But, as Karolyi pointed out, even as more companies are coming to market, there have also been an increasing number of delistings.<blockquote>上市公司经济重要性下降的一个衡量标准是上市公司数量的减少，如下图所示。鉴于华尔街的许多人专注于炙手可热的IPO市场，这种下降被他们忽视了。但是，正如卡罗利指出的那样，尽管越来越多的公司上市，但退市的数量也在增加。</blockquote> <img src=\"https://static.tigerbbs.com/3de45fd68cb24b2bdf2791d1f6b9fac0\" tg-width=\"1260\" tg-height=\"922\"><blockquote></blockquote> For example, according to Refinitiv, through the end of May 2021 there was more than $1.6 trillion in domestic M&amp;A activity, almost 50% higher than the previous calendar year that held the record for the most M&amp;A activity for the first five months. We need to focus on both IPOs and delistings, Karolyi argued, just as demographers can only analyze population trends by focusing on births and deaths.<blockquote>例如，根据路孚特的数据，截至2021年5月底，国内M&amp;A活动超过1.6万亿美元，比保持前五个月M&amp;A活动最多记录的上一年高出近50%。卡罗利认为，我们需要同时关注IPO和退市，就像人口学家只能通过关注出生和死亡来分析人口趋势一样。</blockquote> “The role of publicly traded corporations in the overall economy may be changing,” Karolyi said. Their possible life cycle paths are expanding to include many that don’t end in becoming publicly traded, for example, or waiting much longer before doing so. Given the abundant liquidity in the private equity market, he added, it may very well become the preferred exit strategy for many companies that previously would have gone public.<blockquote>“上市公司在整体经济中的作用可能正在发生变化，”卡罗利说。例如，它们可能的生命周期路径正在扩大，包括许多不会以公开交易或等待更长时间才能公开交易而告终的公司。他补充说，鉴于私募股权市场流动性充裕，这很可能成为许多此前上市公司的首选退出策略。</blockquote> The bottom line? The past decade was extraordinary for publicly traded U.S. stocks. Don’t expect that to continue indefinitely.<blockquote>底线？过去十年对于公开交易的美国股票来说是不平凡的。不要指望这种情况会无限期地持续下去。</blockquote>\n<div class=\"bt-text\">\n\n\n 来源：<a href=\"https://www.marketwatch.com/story/the-s-p-500-would-be-below-1-600-without-these-3-pillars-and-those-supports-are-now-weakening-11622781972?mod=home-page\">MarketWatch</a>\n为提升您的阅读体验，我们对本页面进行了排版优化\n\n\n</div>\n</article>\n</div>\n</body>\n</html>\n","type":0,"thumbnail":"","relate_stocks":{".DJI":"道琼斯",".SPX":"S&P 500 Index",".IXIC":"NASDAQ Composite"},"source_url":"https://www.marketwatch.com/story/the-s-p-500-would-be-below-1-600-without-these-3-pillars-and-those-supports-are-now-weakening-11622781972?mod=home-page","is_english":true,"share_image_url":"https://static.laohu8.com/e9f99090a1c2ed51c021029395664489","article_id":"1162130057","content_text":"Investors may need to consider private equity to capture the returns that publicly traded stocks have provided\nGETTY IMAGES\nStock prices can’t indefinitely grow faster than the economy. This provides a crucial reality check for U.S. stock-market bulls, many of whom believe stocks can continue outperforming the U.S. economy in perpetuity. Over the past decade, for example, the S&P 500SPX,+0.88%on an inflation-adjusted total-return basis has outperformed real U.S. GDP by an annualized margin of 11.9% to 2.0%.\nGoing forward, it could be the other way around, according to an argument advanced some years ago by Robert Arnott, founder of Research Affiliates, and William Bernstein, co-principal at Efficient Frontier Advisors. They pointed out that a portion of economic growth is attributable to non-public companies, such as startups and the like — a category they refer to as “entrepreneurial capitalism.”\nBy definition, economic growth that non-public companies generate will not show up in the stock market— which only reflects the performance of publicly traded corporations. Arnott and Bernstein estimate that share prices historically have grown about two annualized percentage points slower than the overall economy.\nSuch slippage has dire implications for the U.S. stock market’s future return. But I want to first discuss why the stock market’s stunning performance over the past decade was not due to economic growth. Instead, the bulk of that performance was due to three factors:\n\nValuation changes: The S&P 500’s price/earnings ratio has doubled over the past decade.\nIncreasing profit margins: The S&P 500’s operating margin over the past four quarters has averaged nearly two percentage points higher than it was a decade ago, according to data from Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.\nNet buybacks: Over the past decade corporations have repurchased more shares than new shares they have issued. This has reduced the number of shares outstanding, and increased earnings per share.\n\nTo appreciate the impact of these three factors, consider that the S&P 500 now would trade below 1,600 if there had been no change at all over the past decade with each of these three dimensions. While the chance of such a perfect storm is so low that you might be inclined to dismiss it out of hand, Bernstein said in an interview that he wouldn’t discount the possibility.\nProjecting the future\nThe picture this analysis paints about the U.S. stock market’s future isn’t pretty, assuming the U.S. economy grows at the same pace over the next decade as the last. In that case, the only way the market can produce annualized returns greater than the low single-digits is for the P/E ratio and profit margins to continue rising or for net buybacks to continue reducing the number of shares outstanding — or for some combination of these three factors to occur.\nMore likely, these three tailwinds will become headwinds. P/E ratios already are at or near the high end of their historical distribution, and they can’t go up forever. Profit margins also are at or near record levels and,as I argued earlier this week, there are good reasons to expect those margins to decline in coming years. While it’s possible that buybacks will outpace share issuance in coming years, that’s hardly a sure bet. Over the past 12 months, for example, there have been negative net buybacks — i.e. more shares have been issued than repurchased. In fact, Arnott pointed out in an email, for most of U.S. stock market history net buybacks have been negative.\nOne can also wonder if an even-greater share of economic growth in coming years will accrue to non-public equity. Andrew Karolyi, dean of Cornell University’s SC Johnson College of Business, said in an interview that private equity now plays a much bigger role than in the past. One possible future, he said, is that the growth of the public stock market lags that of the overall economy by an increasing amount.\nOne measure of the declining economic importance of the public corporation is the decreasing number of publicly traded companies, as reflected in the chart below. This decline has been overlooked by many on Wall Street, given their focus on the red-hot IPO market. But, as Karolyi pointed out, even as more companies are coming to market, there have also been an increasing number of delistings.\n\nFor example, according to Refinitiv, through the end of May 2021 there was more than $1.6 trillion in domestic M&A activity, almost 50% higher than the previous calendar year that held the record for the most M&A activity for the first five months. We need to focus on both IPOs and delistings, Karolyi argued, just as demographers can only analyze population trends by focusing on births and deaths.\n“The role of publicly traded corporations in the overall economy may be changing,” Karolyi said. Their possible life cycle paths are expanding to include many that don’t end in becoming publicly traded, for example, or waiting much longer before doing so. Given the abundant liquidity in the private equity market, he added, it may very well become the preferred exit strategy for many companies that previously would have gone public.\nThe bottom line? The past decade was extraordinary for publicly traded U.S. stocks. Don’t expect that to continue indefinitely.","news_type":1,"symbols_score_info":{".IXIC":0.9,".SPX":0.9,".DJI":0.9}},"isVote":1,"tweetType":1,"viewCount":1533,"commentLimit":10,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"symbols":[],"verified":2,"subType":0,"readableState":1,"langContent":"EN","currentLanguage":"EN","warmUpFlag":false,"orderFlag":false,"shareable":true,"causeOfNotShareable":"","featuresForAnalytics":[],"commentAndTweetFlag":false,"andRepostAutoSelectedFlag":false,"upFlag":false,"length":27,"xxTargetLangEnum":"ORIG"},"commentList":[],"isCommentEnd":true,"isTiger":false,"isWeiXinMini":false,"url":"/m/post/112657072"}