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Our estimates show that, over the next 10 years, stocks and bonds will likely fall short of their historical annualized returns from 1970 to 2017. The estimated annual expected return for U.S. large-cap stocks from 2018 to 2027 is 6.5%, for example, compared with an annualized return of 10.5% during the historical period. Small-cap stocks, international large-cap stocks, core bonds and cash investments also are projected to post lower returns through 2027. However, the expected annual return for international large-cap stocks is 7.2% over the next 10 years, which is higher than the expectations for U.S. large-cap stocks.
Vanguard's outlook is much worse, 3-5% for the US stock market as a whole:
There are a lot of talking heads who believe that bond yields will remain low and stock returns will face a major down cycle or at best will taper downward. Of course, we have heard that from a whole bunch of talking heads for at least the past 5 years.
I have no idea what the next 10 years will bring. It does seem that at least the next year or so is looking decent for economic growth and for stocks. Even Trump and his tariffs have not been able to kill the trend.
I've been reading anything from 2% to 6.5% from the experts. Nominal that is.
My wild guess is -
Domestic Equities (Total all Cap) : 6%
International Equities (Total Intl.): 3%
Intermediate IG Bonds: 3%
What do you think?
Not a clue and wouldn't waste time on it. Watch the news day to day and buy undervalued companies, and don't forget dividends. Let the returns take care of themselves.
whatever is going to send us down are always things not even on the radar . all the headlines and talking heads thought 2008 was just a typical blip that would not effect things as stocks were making new highs . 2000 we had markets soaring and a downturn was never in the cards . then came the irrational exuberance speech and boom .13 years later were were still working our way back inflation adjusted . before that it was the s&l crisis and iraq invasion .
the crash of 1987 saw blue skies and new market highs on the radar . so on and so on . every downturn in history came from the times stocks were making new highs and it looked like nothing on the radar could derail things .
i know we had 17 years of almost 14% returns from 1987 to 2003 . if you asked me to project my balance 15 years later i would have said some ridiculous balance .little did i know markets were going to return 1.88% in real return with dividends 15 years later .
Last edited by mathjak107; 09-08-2018 at 04:31 AM..
Jeremy Grantham's latest 7 year forecast (usually pretty accurate) is as follows (average annual real returns):
U.S. large stocks (4.9%)
U.S small stocks (1.3)
Intl. large stocks (.7)
Emerging mkt. stocks 2.7
U.S. bonds (.2)
Emerg. debt 1.9
I think his prediction of outperformance of international/emerging markets stocks and debt is likely correct. At best, I see a flat market for U.S. equites over the next 7 years. It's going to be a stock picker's market. Good active managers are likely to outperform the indexes.
actually jeremy has been pretty bad . i'll pass on him as a guide for anything
ny times
" As the WSJ first reported, Grantham "has been out of step with the market several times during the firm’s four decades. GMO has usually rebounded, with the 78-year-old investor earning acclaim with asset-bubble calls ahead of Wall Street busts in 2000 and 2008." However, this time a recovery may probe problematic as the firm is "going through one of its roughest periods" and as a result assets under management have tumbled to about $80 billion, according to someone close to the matter, down from a peak of $124 billion in June 2014, a drop of 35% in two and a half years. The drop in assets has forced the firm to fire about 10% of its workforce, cutting some 65 jobs, in June last year.
The reason for GMO's underperformance has been Grantham's overarching skepticism about the viability of the market rally: "Bearish about what it sees as high valuations of U.S. stocks, GMO’s flagship mutual fund, the GMO Benchmark Free Allocation fund, has largely missed out on the latest rally in U.S. stock indexes."
The skepticism means that the firm has generally underinvested at a time when all central banks have stepped in to avoid any notable market declines or corrections. According to the WSJ, GMO held about 7% of its assets in U.S. stocks as of the end of September, with 27% in cash, 16.9% in developed markets outside the U.S. and 20% in “alternative” strategies such as global “macro” investing, according to the firm. WSJ adds that GMO also had over 20% in emerging-market stocks and bonds—an investment that did nicely earlier in 2016 but has suffered in recent months following broad selloffs in credit securities.
As a result, the GMO Benchmark Free Allocation fund rose 3.4% in 2016, compared with a gain of about 5.7% for its peers, according to fund tracker Morningstar Inc., and a gain of 12% for the S&P 500, including dividends. The firm says the fund tries to beat inflation, which rose less than 2% over the past year"
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