10 lessons for investors from 2013
Sentiment can matter more than fundamentals
Investors were willing to pay more for stocks, leading to a rise in the price-to-earnings ratio as they grew more confident in the durability of future growth. This brighter outlook drove most of the S&P 500 Index’s gain in 2013, not the mid-single-digit pace of earnings growth or lackluster 2% gross domestic product (GDP). This is not uncommon. Historically, stocks have posted the most consistent gains when GDP has been around 3%.
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