Do you think the stock market will accelerate its growth in the future?

I often write on Quora.com, where I am the most viewed writer on financial matters, with over 335.2 million views in recent years.

In the answers below I focused on the following topics and issues:

  • Are financial markets likely to do better in the future, compared to the past?
  • Are big Chinese cities more developed than American ones?

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Source for all answers – Adam Fayed’s Quora page.

Do you think the stock market will accelerate its growth in the future?

Cathy Woods made a great point a few days ago. She mentioned how we might be moving towards the most innovative time in human history.

If you think about it, the last few decades haven’t seen some of the big innovations of the best.

We haven’t had the equivalent of the car for a long time. The car put the horse and cart out of business for good.

The iPhone, for example, might be innovative, but it is using older technologies in a more modern way. Technologies like the camera, phone and so on.

The most innovative technology has probably been the internet, but in the early years hardly anybody else it.

Even ten years ago, most people didn’t do very high-trust tasks online, like hire, find lawyers and so on.

Most people just shopped for goods on Ebay, Amazon etc. It is only in the last 5–10 years that many people are living their entire lives online.

The pandemic only accelerated this trend. This has allowed firms to become more profitable and efficient.

Nike achieved in digitalisation terms in six months, what they expected to achieve in half a decade!

Good for consumers and Nike when people are going direct to consumer. Less good for malls.

In the next decade, we have a range of technologies which will make businesses more efficient.

AI, the internet of things and so on. Supply chains will probably become more efficient, and those middlemen who aren’t adding extra value, will be replaced.

Of course, nobody can predict the future, and the economy and stock markets often aren’t linked in any case – at least GDP growth.

What is more, over most 30 year time periods, the stock market has performed at a consistent rate.

The difference between the performance of the Dow Jones between 1900–1930, 1930–1960, 1960–1990 and 1990–2020 wasn’t as different as people might expect.

What could make a difference is if most of the innovation coming helps firms become super-efficient.

So, I am not sure if the market will accelerate its growth in the next thirty years. I suspect it will do just as well as in the past though.

Are Chinese big cities more developed than American ones?

Let me give you a comparison before speaking about China.

In 2014–2015, I spent the year in South East Asia, having previously been in China.

Most expats, including Americans and Chinese, come to places like Cambodia, and even Indonesia, expecting it to look poor.

And in some ways, it did look poor in 2014–2015, at least in terms of infrastructure. Yet when you spend time in the major capitals, you see a lot of consumerism going on.

One man I met, from the UK, commented how he had never seen so many SUVs and other fancy cars in the streets in his life.

In Jakarta, I met a South African man who commented that “apart from London, I haven’t seen so much wealth in all my life”.

The problem here is this

  1. Indonesia has a population of 273 million. Even if a fraction of those are rich and are in Jakarta, that doesn’t mean the average person is rich
  2. Phnom Penh, in 2014, was home to most of the wealthy locals. Even so, 50,000 or so were rich, 2 million poor, and a small middle class
  3. In both cities, there was a sense of “if you have it, show it”. The “face” culture you see in many parts of the Asia-Pacific was on display here.
  4. In comparison, in many “old wealthy” countries in Europe, showing off is frowned upon. It is in Japan, up to a point as well, unlike during the bubble years.
  5. Wealth and income aren’t the same thing. If somebody has bought a $100,000 car, that could mean that they have it on credit, or they have spent a high percentage of their net worth on the item.

Therefore, as a result of this, it could be easy to overestimate both places. Tokyo is estimated to have more USD millionaires than anywhere on earth, but you won’t see as many fancy cars or over-consumption around.

Switzerland and many smaller European countries have some of the highest per capita wealth in the world.

But most of these small European countries have low rises, and again, don’t like overconsumption as a generalization:

The average Swiss, or Japanese, millionaire who has $1million in assets, wouldn’t spend $200,000 on a car. In some developing countries, things are different.

This leads me to China. Shanghai looks like this:

Many parts of Switzerland, and the US for that matter, look like this, in terms of low rises:

Yet that is irrelevant. That just means that infrastructure might be more developed.

The US has a GDP per capita of about $70,000, and much higher in bigger cities, China’s is about $10,000, and even Shanghai’s is only about $25,000.

As a final comment, as somebody who lived in China for 4.5 years and visited on about 40–60 occasions apart from that, it is important to understand the “face culture”.

As per Wikipedia’s definition “Face is a class of behaviors and customs operating in different countries and cultures, associated with the morality, honor, and authority of an individual, and its image in social groups” – although it is more complicated than that on the ground.

This is relevant here for a simple reason. Many fancy, multi-millionaire dollar, apartments look like this in the bigger cities:

In other words, very similar to fancy apartments elsewhere – perhaps with just a high-rise view.

And yet in many of those very same apartments, you can’t flush toilet paper down the toilet, and instead need to use a trash bin, because of the poor wastage system.

You will also see fancy, expensive cars, parked next to a “rough and ready” apartment block, where sometimes the occupants are using a toilet like this:

And yes, you usually can’t flush many pieces of toilet paper down these toilets as well, even if the owner has a flashy car.

Judge a place by the average GDP per capita or GDP per capita PPP, or even better, average wealth per capita.

In much the same way that if some poor countries build loads of good infrastructure, and outwardly look more developed than China, that doesn’t make them as developed as a mid-income level country like Mainland China.

Many people went to Moscow in the 1930s and commented on how “this seems like the future”, because they only went to the most developed part of the country, and saw the good sides only.

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Financial Planner - Adam Fayed

Adam is an internationally recognised author on financial matters, with over 415.7 million answers views on Quora.com and a widely sold book on Amazon

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