Equity market earnings grow slower than GDP due to entrepreneurial capitalism driving GDP growth, not existing enterprises. Historical data suggests a 2% lag in US stock prices and dividends compared to macroeconomic growth. For future returns, consider a dividend rate of 1.5-2% and dividend growth 2-3% less than India’s nominal GDP growth. Source: William Bernstein and Rober Arnott, “Earnings Growth: The 2% dilution”, Financial Analysts Journal, 2003.
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