Does Global GDP Growth Drive World Stock Returns? From 1970 onward, we now have nearly five decades (48 years) of data from which to compare global GDP growth rates with returns of the MSCI World Index. Just eyeballing the chart below, where stock returns are plotted against year-ahead GDP growth (since stock markets are forward looking), the relationship appears fairly strong.
NOTE: Stock returns are compared with year-ahead real GDP growth rates.
Sources: GDP Growth from World Bank; Stock Returns from MSCI World (1970-1998), MSCI ACWI (1999-2017).
The Current Outlook for Global Growth? In encouraging news for global stock investors (whatever your allocation), the IMF has lately been upgrading its global growth forecasts for the first time in years (chart below). The Fund describes world growth today as robust and broad-based, with "some 120 economies, accounting for three-quarters of world GDP, seeing a pickup in growth."
NOTE: Forecast lines run left-to-right, earliest forecast to latest.