Innovation

Via Credit Suisse:

"At the beginning of 1900, virtually no one had driven a car, made a phone call, used an electric light, heard recorded music, or seen a movie; no one had flown in an aircraft, listened to the radio, watched TV, used a computer, sent an e-mail, or used a smartphone. There were no x-rays, body scans, DNA tests, or transplants, and no one had taken an antibiotic; as a result, many would die young."

Back in 1900, railroads accounted for 63% of the US stock market value. Today, railroads comprise less than 1% of US stock market value (fun fact: Warren Buffett owns one of America's largest railroads, Burlington Northern Sante Fe). "Of the US firms listed in 1900, more than 80% of their value was in industries that are today small or extinct."

This chart is a case for optimism about stock market returns over the long haul. Innovation is the constant, and it helps drive economic growth.

There will always be innovators and entrepreneurs in America and abroad. They will seek to revolutionize existing industries and even create new ones. They will seek to create better products and services, and drive more profits for themselves, their employees, and for shareholders.

The US stock market is not an amorphous blob; rather, it is the cumulative value of all publicly-traded companies in the US. The names and types of companies within that market will evolve over time, but each company will be doing its best to maximize revenues and profits, thereby creating economic value for others.