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how does the stock market keep going up
First, a correction: the market does not just keep going up. In 1931 the S and P five hundred fell about forty-four percent in a single year.
It fell again in 2008, about thirty-seven percent, and in 2022 about eighteen percent. The climb is real, but it is jagged.
Yet stitch 1928 through 2025 together, dividends included, and it averaged about ten percent a year, before inflation. So what pulls it up?
John Bogle split a century of decades into parts: dividends 5.0 percent a year, earnings growth 4.8, a shift in price-to-earnings 0.6. Total, 10.4.
The engine is a loop: firms earn profits, reinvest, grow, and earn more. Over the long run, Bogle found, enterprise drives returns, not mood.
Valuations are the wild card. In the 1970s earnings grew 9.9 percent a year, but price-to-earnings fell from sixteen to seven, dragging prices down.
So it doesn't keep going up; it keeps being pushed up by dividends and earnings growth, with dips whenever investors reprice, often out of fear or as rates and inflation jump.
The market rises when the businesses in it earn more, and it stumbles whenever investors reprice it.