For 140 years, US large cap stocks have risen at a trend rate of 6.4% on a total return inflation-adjusted basis. That period has encompassed two world wars, deflation, depression and two periods of high inflation. It has also included the great US century of global economic, political and military dominance. We believe this long-term trend is sustainable as long as the emerging world fulfills its potential for growth and the US tackles its structural problems. The US' position as the world's superpower and the global nature of US companies - the S&P 500 generates nearly half its earnings overseas - underscore the trends' sustainability, in our view, but we do not expect this index of large cap stocks to rise much above its trend in the next seven to ten years.

David Fuller's view Fullermoney loves a good graph and this is one of the best - don't miss it. That trend growth rate of 6.4% since 1870, plus the balance sheet strength and earnings of US large-cap stocks leveraged to the Asian-led global economy are major reasons why the S&P has not swooned due to a weak domestic economy, runaway deficits and policy deadlock. Investors buy stocks, not the economy.

On considering The Weekly View's graph of Large Cap Stocks: Real Total Return Index, I ask myself, why shouldn't the world's two emerging superpowers, China and India, achieve the same admirable total real return, or better over the next 140 years?

I am certain that every reader can think of all sorts of reasons why they could fail to do so. I am equally certain that people had similar reservations about the US stock market, given the advent of WW1, the Great Depression, WW2, the 1970s inflation, the Crash of '87, the tech bubble, the recent credit and insolvency crisis, and today's runaway deficits, to mention some of the headwinds. The 140-year trend has been flattered by a soft US dollar at times, particularly since 1971 when the currency's last link to gold was severed. Nevertheless by enduring it proves that equities are a good hedge against stealth currency devaluation. The stock market also faced four secular 'bear market' valuation contraction cycles. We are still in the most recent of these, evidenced by the S&P 500 Index's twin peaks since 2000 which have yet to be cleared.