If you’ve been in the market long enough, you’ve probably heard the phrase, “The S&P 500 always goes up over time.”
But why is that? What makes this index so reliable, even after recessions, bear markets and financial crises?
It comes down to three key factors: long-term U.S. GDP growth, a steadily increasing population and the way the index is structured. These forces create a built-in upward bias in the market — and understanding them can help you invest with confidence.
The Three Pillars of Market Growth
First, let’s talk about GDP. The U.S. economy expands over time, not every quarter or even every year, but over decades. And as long as GDP keeps growing, the companies within the S&P 500 become more valuable.
That’s why long-term investing works. It’s not about timing the next move — it’s about participating in a system designed to rise over time.
The second key factor is population growth. The U.S. has a growing consumer base, and since consumer spending makes up 70% to 75% of GDP, more people means more economic activity.
More workers, more buyers, more demand — all of it fuels higher corporate revenues and earnings, which translates into higher stock prices.
The third factor is what makes the S&P 500 unique: It constantly removes underperforming stocks and replaces them with stronger ones. If a company is struggling, it eventually gets kicked out.
If a new leader emerges, it gets added. This is why the index isn’t weighed down by companies that fail — it’s always tilted toward strength.
The Hidden Engine Behind Market Resilience
This constant rebalancing is the reason the S&P 500 doesn’t just mirror the overall economy — it outperforms it. The index isn’t a stagnant list of companies. It’s a living, evolving benchmark that naturally eliminates the weak and embraces the strong.
Think about it like this: If you had a portfolio where you could automatically swap out your worst stocks for the best ones every year, what would your returns look like?
That’s exactly what happens with the S&P 500.
This process is a major reason the market keeps climbing over time. Even during recessions, bear markets or periods of extreme volatility, the underlying structure of the index keeps it on an upward trajectory.
That’s why the phrase “The market always goes up” isn’t just optimism — it’s based on structural reality. If GDP keeps growing, if the population keeps expanding and if the index keeps refreshing itself with stronger companies, then the long-term direction remains the same.
That doesn’t mean there won’t be downturns.
There will be years where the market struggles, just like there are years when the economy contracts. But over decades, the forces that push the S&P 500 higher remain in place.
And as long as they do, that built-in upward bias will continue working in investors’ favor.
Kane Shieh
Kane Shieh Trading
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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.
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