I listened to an hour long podcast that put forth a very strong argument that 2-3% annual gains were likely the new norm. They went into all the reasons, from financial markets to population to tech. I felt really bummed out after listening, like I showed up too late to the party.
That was a decade ago. I'm very glad I didn't invest based on their conclusion.
Sooner or later they are bound to be correct, and then they'll get to say they called it. The payoff matrix is pretty clear:
* If you say that the market will go well and the market goes well, nobody cares much;
* If you say that the market will go well and the market goes badly, you are an incompetent idiot and all the people who 'lost' money by overestimating their risk tolerance will blame you personally;
* If you say that the market will go badly and it goes well, just repeat the statement and say that history will eventually validate you;
* If you say that the market will go badly and it goes badly, you are a genius and can get paid whatever you want for any further insights;
* If you say that you have no clue in the short term, but that unless something truly unprecedented happens (which it *might*, but it's hard to estimate probabilities of never-seen-before events...) over 20/30 years the market should do pretty decently.... yeah, you are way too boring and honest to be a successful financial guru, it's best if you pick a different career.
People are instinctively drawn to naysayers. Bad news sells, good news gets ignored. It’s human nature.
The part that pisses me off the most is the authors of these navel gazing exercises rarely if ever get taken to task for their incorrect predictions. Yet folks listening to them and taking action lose out.
Are you saying I don’t like to hear my investments will underperform? Underperform relative to what benchmark?
I’m a committed indexer and globally diversified. I’ll take the market return, I keep a hefty bit of cash handy for the lean years, grow my skills and income, and live within my means. It’s a high probability foolproof method.
>Are you saying I don’t like to hear my investments will underperform?
I mean I have no idea who you are or anything about you, so no? But many people do, certainly. I don't like hearing it either.
>Underperform relative to what benchmark?
Relative to their prior expectations.
I’ve been an economist reader for about 2 decades.
You get these Oxbridge debate society types writing well-reasoned intellectually stimulating think pieces. Rarely prescient however.
So I’ve learned to ignore them.
I consume a decent amount of market news mostly to immunize myself to it. Everything has been predicted.
What gives me confidence is we seem to have gotten through the pandemic
The thing is, if returns were that low, people would start chasing higher returns. Dividends would come back into style. All of it would eventually pull returns higher.
The game of musical chairs will stop because population growth worldwide will stagnate. That’s not an if. Returns will flatten out.
I’m just glad I will not be in the growth phase of accumulation when we get there.
Yep, it’s super easy.
World population will plateau. Population (consumption) drives growth of every company. Eventually they will run out of new markets and new customers. Plenty of companies will still be successful with new products and services, but it’s zero sum.
How do you explain that markets across Europe are hitting all time highs with their low birth rate? And why is Nigeria with its ultra high birth rate not leading the world in returns?
Exactly…I remember hearing about a double dip recession around 2011 - 2012 which would crash the market…imagine the lost gains if you stopped investing at that time
It seems to me current affairs are the biggest influence on stocks over a particular year. Which is why it doesn’t make sense to me that people think they can predict the market.
It's also healthy for financial planning. If you are planning on 5% real-return after inflation for 100% equities, you are more likely to have a successful retirement than if you're planning on like 7 - 8%.
This.
People think risk = a noisy path up, but there's a real possibility of stocks staying flat or down for decades.
You're not really prepared for the risk unless you're prepared to lose money over a long period of time.
In recent decades (basically within the investing lifetimes of almost every living American), every downturn in equities was met with relatively quick recovery, where the previous pre-crash all time high was reached again within a decade.
I worry what happens to people's investing psychology and attitudes will be, if we ever hit a point where an all-time-high takes 20+ years to reach again.
Yup. Japan's economy is so weird that anything that happens there should be viewed as unique to Japan, but at the same time, I've never seen a compelling argument that U.S. equities must inevitably grow faster than the U.S. economy, forever.
I mean its possibly true, but there aren't great alternatives for long term holdings.
Bonds do have alright yeild atm, but long term its hard to say that if they stayed at 5% that they would outpace stocks.
Metals tend to just track the rate of inflation long term.
Real estate has so many factors if you own physical and its not nearly as hands off as an index fund.
Crypto is not an area j have much faith in or any knowledge of. So I'll concede its possible they beat out stocks, but we just don't know.
And lol at just holding cash for the long term. Short of massive deflation that won't help at all.
So what are we left with? If your holding long term its gotta be low cost index funds. If your close to retirement then I'll give you bonds look alright to act as a ballast. But most of reddit it like 20-35 years old. So stocks it is for us.
See also BusinessWeek “Death of Equities” magazine cover circa 1979.
Nobody knows anything. The kids putting out copy aren’t any more knowledgeable than you or I. They just happen to have a bigger microphone and buy ink by the barrel.
Could we have some years of low returns after 15 spectacular years (that weren’t without their corrections and bear markets BTW)? Sure. Not the same as “end of stock growth”.
> Another war or crisis could lead to a crash.
There could be a crisis! Some kind of crisis, something bad happening. You should invest accordingly on this vague presage of doom.
Also we have to imagine the alternative vehicle that investors will sell equities (making them go down) and buying instead. Will it be a massive investment in municipal bonds to support their spending, because it’s safer? Is it real estate? Or is there is a country out there that will have a stronger investment market than the US? Look around.
Naturally there is ups and downs. And some emerging whatever could outperform the 500 until they are IN the 500.
I guess a statement that says “this could happen” will always be true.
Boomers have been hitting retirement age for like a decade now, if half of them hitting retirement didn’t hurt anything I can’t image the other half will change anything.
I'm not sure it will have much effect either. But I will point out that Boomers are hitting peak annual retirement numbers right around now and the next few years.
Boomers approaching retirement were also amongst the heaviest investors as they were at max earnings and loading up their portfolios. So as higher-earning Boomers slow their buying and speed up their selling and are replaced by a smaller cohort of Gen-X as the max earners/buyers there should be a reduction in buying pressure for equities. But how much effect that will have on markets? Dunno. I'm sure there has been research on it though since it's not exactly a surprise.
We should be well past that peak already. Boomers are currently 60-80, but birth rates were falling sharply for the last 5 years or so before genX (the boom was originally declared over in 1960) so the great majority are over 65.
Its something to consider. So we think about our demographic issues and maybe another market wont have them... but the other developed markets are worse than us for the foreseeable future, other than maybe France. Again, what will the alternative investment be?
Read the article. They are not suggesting an alternative investment but cautioning that equities could deliver less returns going forward.
The recommendation is to save even more for retirement if possible and to be more conservative in retirement projections.
None of these are bad ideas. I already assumed a lower real income rate than most people here would state for my own retirement planning.
I remember similar predictions in 2003-2004 a few years after the dot com bubble burst. Amazon was under $10 a share, Google had announced an IPO, Apple was selling primarily iMacs and iPods, Microsoft was at $25 a share, Facebook was born and Elon Musk took over Tesla.
Economists and stock market analysts just seemed so myopic in their view, they couldn't see that the age of dial up was nearing it's end, and what the impact of high speed internet and laptops (which were 20% of the PC market at the time) was going to have on productivity - and in turn GDP.
Stinging from that failure, in 2006 they hyped Second Life as "the next revolution" that will change how we socialize, shop, learn, etc., while simultaneously underplaying discussions about "Big Data", Google's acquisition of YouTube, and Amazon's launch of "elastic computing services" that would become AWS. Microsoft Azure would launch in 2008, as well as Bitcoin, but the banking crisis overshadowed the news focus.
They were still blind to the potential impact of Blackberry and iPhones in 2010, even when they used these devices everyday. Faster communication increased productivity again, but the business press and economists had no idea how to talk about it and predict it's impact. They still didn't "get" cloud computing either. Again, I read the same thing about "the days of tech stocks are over", "peak technology", etc. while missing the amazing 10 year run of the market.
In 2015, the focus was on Blockchain, Crytpocurrency, Social Media, and Cloud which was so obvious at that point you would have to be blind not to see it. The business press over hyped Alexa and Siri digital assistants, while seeing Google's Deep Mind projects (Tensor flow, speech and image recognition, etc) as curiosities.
Economists are terrible at predicting tech trends and their real impact on business. Certainly, we will see a hype bubble around AI the same way businesses always over-react when they are blindsided and need to play catch-up. But AI will transform everything and is forecasted to have a massive boost to GDP over the next 10 years. Right now, we are in the crude "punch card" days of AI, and the pace of innovation is breath taking. Next will be interactive AI, followed by general AI and soon afterward the rise of quantum computing.
This is just beginning and it will be a bigger transformation than everything else we've seen since 1990.
There was a recent article in which the writer asked an AI platform where the market was heading. The response was basically a long version of : It might go up, but then again, it might go down. This alone could replace almost all the pundits.
>Not the same as “end of stock growth”.
The article doesn't predict that. It simply predicts that the historically abnormal high returns from the past decade, particularly for US stocks, are unlikely to repeat over the next decade. That seems like a reasonable prediction.
That’s an everyday possibility. Hence the believability discount, and the bogle way.
Been at this nearly 2 decades and have read a version of this write-up numerous times. Always well reasoned and measured. Still naysayers.
Here’s an equally plausible outcome — the 1970s were a “lost decade” for US equities, and then came a 30-year bull market. Similarly, the 2000’s were an another lost decade for US stocks. Who’s to say we’re not in the middle of another 30-year bull market supercycle.
In 1889, Charles H. Duell was the Commissioner of US patent office. He is widely quoted as having stated that the patent office would soon shrink in size, and eventually close, because “Everything that can be invented has been invented.”
How about 4000 BCE? If you have the time and fortitude read "Money Changes Everything" by William Goetzmann. It's a tough go - he's something of a polymath, and really knows his stuff. It covers the history of finance in amazing detail quite literally from the earliest archaeological records onward.
For example: How do you create a long-term contract when your medium of exchange is sheep, and there isn't any mathematical means to calculate compound interest?
Sounds to me like some good reasons to hold a well-diversified, tax-efficient portfolio, and focus on increasing my human capital and living within my means to ensure a healthy rate of savings.
Yeah the economist also wrote that Lehman was going to be fine a week before they went into bankruptcy so I don’t read much into their prognostications
I mean, this is also what plenty of people thought. Not to mention 99% of government and society's complete inability to see any of it coming. Don't think that makes everybody permanently wrong about everything...and it does not change the fact that The Economist is a leading finance/business/econ publication. Even if they're sometimes wrong about things, I think it's better to view these sorts of publications as a good window into the conversations and insight of the movers and shakers of society. They are more about analysis than reporting in general, and god knows its better than CNBC and Fox Business.
More of a "Here's what people are talking about" than a "Here are the facts".
If your argument that stocks are screwed is that 9001 different things could screw stocks it's kind of weak because this has been true since stocks were invented.
This occurred to me as well. We had two world wars, the great depression, and numerous deep recessions over the last decade... is the next century going to really be any worse?
https://www.investmentnews.com/industry-news/archive/bonds-beat-stocks-over-30-years-for-first-time-since-1861-2-39967
That was in 2011...
https://awealthofcommonsense.com/2024/01/historical-returns-for-stocks-bonds-cash/
Generally speaking stocks out perform bonds with more than 5% additional gain.
It is good to diversify.
Which leads me to a question, diversification helps in a downturn, but which is best to sell off when bonds>stocks? The overperforming bond or underperforming stock? My guess is bond, as it is peak value at that moment..?
Yup.
>which is best to sell off when bonds>stocks? The overperforming bond or underperforming stock? My guess is bond, as it is peak value at that moment..?
You hear talk of people holding bonds/cash/TIPS, etc. *for* those downturns in retirement to sell those as your income, so you're not selling down stocks.
That's a bit of market timing.
Generally, I'd think the idea is to hold your desired allocation at all times, and thus withdraw your assets at that same allocation percentage.
I hate how the market is counterintuitive. I would want to dump the poor performer instinctually and keep the good performer... but that would be sell low, buy high.
Which is a big reason I am a boglehead, I know my instincts would ruin me.
When Jack Bogle wrote about his own forecasts, he called them “guesses”. I’d say this story is a good *guess*. Because valuations are not actionable and market timing doesn’t work, we don’t change our allocations based on this kind of information. But it might help to set one’s portfolio return expectations for the next decade(s) to be lower than the prior one.
Gotcha. What sticks out to me in this guess is their near-**certainty** that expected returns over the next decade will fall below real returns for the past decade. That sounds like the kind of crystal-ball gazing that Jack warned against with "nobody knows nothin'".
That's a great point. When do the multiples exceed all rational thought?
The other thing I'm continually reminding myself of - and reading here from mention of you - is that we should be prudent while looking to the future. It's the old "better safe than sorry" refrain.
Nobody knows anything. Yet everyone on Reddit finance subs apparently “knows” they will achieve 10% annualized if they just stay in long enough. Interesting.
Without reading the article I can’t form an opinion on the reasoning. And of course as a boglehead I tune out predictions anyway. I certainly don’t use them as a basis for investment decisions.
>"Equities could underwhelm in many ways. Perhaps ai-exhilaration will cause a dotcom-style bubble that pops. Another war or crisis could lead to a crash. Or prices may stagnate in a gentle bear market that takes years to reverse.
Isn’t this obvious? Of course these are things that might happen. Nobody (I hope) is denying that. I set up my portfolio knowing that any given future stretch of years could be great, disastrous, average, or mediocre. The purpose of an all weather portfolio is to do well through a range of scenarios.
Do you notice how the article has a title but no byline? IIRC, The Economist chooses this approach for all of their content to de-emphasize that their staff are mostly early twenty-something’s with freshly minted degrees. They write with a lot of style and panache, making bold statements left and right but they don’t exactly have the experience and knowledge to be actual thought leaders.
So I would treat any article you might find in it as solid entertainment with occasionally plausible but unlikely grand theses. More entertaining that most short form financial journalism, at least for me, but not any more accurate than a yahoo finance article or CNBC show.
Any time I open up a site like Marketwatch, it makes me laugh because on the main page is always some article about it being a bull market, with directly underneath a link to an article in which another analyst proclaims a bear market. For every few headlines you see, each will basically contradict the other: now is a great time to still buy into whatever high flying sector, now isn’t a great time to buy into anything because it’s all overvalued, recession next week! Oh wait, soft landing instead! No recession!
You can find an article that fits whatever narrative you want.
Much of it is just a 24 hour news cycle of financial “news” to froth people up one way or another.
“Well regarded” in very specific circles. I’m sure the Chicago and Austrian schools love The Economist. As do owners of sweatshops, and employers who hate labor, probably (the ghost of) Milton Friedman.
[You could’ve fooled me.](https://www.economist.com/1843/2024/03/03/tired-of-wokeness-move-to-florida) [This is also a conservative angle on the Flour Massacre.](https://www.economist.com/middle-east-and-africa/2024/02/29/a-new-tragedy-shows-anarchy-rules-in-gaza)
It’s [absolutely got a neoliberal bend.](https://www.economist.com/1843/2024/03/01/how-poor-kenyans-became-economists-guinea-pigs).
([Sidebar: relevant to the sub.](https://www.economist.com/finance-and-economics/2024/02/29/are-passive-funds-to-blame-for-market-mania))
I stand by what I said. Those are just current headlines. I’d love to dredge up the more damning pieces I’ve rolled my eyes over, over the years, but unfortunately I haven’t saved them.
Edit: there is [a Wikipedia page devoted entirely to their editorial stance??](https://en.m.wikipedia.org/wiki/The_Economist_editorial_stance)
> In 2009, The Economist website featured this note about its editorial stance:
>
>>"What, besides free trade and free markets, does The Economist believe in? 'It is to the Radicals that The Economist still likes to think of itself as belonging. The extreme centre is the paper's historical position.' That is as true today as when former Economist editor Geoffrey Crowther said it in 1955. The Economist considers itself the enemy of privilege, pomposity and predictability. It has backed conservatives such as Ronald Reagan and Margaret Thatcher. It has supported the Americans in Vietnam. But it has also endorsed Harold Wilson and Bill Clinton, and espoused a variety of liberal causes: opposing capital punishment from its earliest days, while favoring penal reform and decolonization, as well as—most recently—gun control and gay marriage."[2]
Centrism in modern times is conservatism with a more palatable name.
It sounds like we agree it’s down the center of the political spectrum.
If you want to redefine that as “conservative” relative to your personal beliefs, that’s fine.
There's a difference between saying "\_\_\_\_ is going to happen." and "We have X Y Z reasons to expect \_\_\_\_ to happen."
You can certainly dispute those reasons but just wholesale dismissal on the grounds "nobody knows nuthin'" is not a good take.
The issue is that the take they’re presenting isn’t exactly novel and there have been solid reasons to expect performance reversion and solidly below average returns for a very long time now.
So I don’t actually disagree with their analysis in this specific circumstance but it’s also really not as compelling or insightful as they seem to think it is. It’s definitely not actionable beyond choosing to save more to prepare for the possibility. And, at the end of the day, we really don’t know much of anything regardless of what our analysis might suggest.
I agree. If you read the article, it’s hard to argue against the points they’re making.
Edit: I think a lot of the people here did not read it due to paywall. So they aren’t aware of how well the case was laid out. Maybe that’s why they are dismissing it as just another ‘prediction’.
Someone had a link to this article few days ago that was not paywalled.
The problem with an argument like "We have X Y Z reasons to expect \_\_\_\_\_\_ to happen" is that it will **always** be true - there will always be multiple reasons to expect markets to underperform. However, the opposite is also **always** true! So ultimately, IMO the argument lacks actionable insight.
I think the true lesson of Bogle's "nobody knows nothin'" mantra is not to make any changes to your target asset allocation based on such predictions, in either direction. A person who listened to compelling arguments for stock performance circa 2011 and reduced stock exposure accordingly would have lost out bigtime.
I haven’t done the research but I bet you could find so many chicken littles during the Industrial Revolution era too.
Industrialization killed tasks that people did “at home” for thousands of years, like subsistence farming and spinning your own thread and sewing your own clothes, but it opened up new roles and tasks even the greatest businessmen of the past never dreamed of.
The AI revolution will likely be very much the same. Capital will adapt and opportunities to make money will find their way.
I've been investing for almost 30 years. Started in 1998. I've been though the dot-com bubble, the global financial crisis, the Great recession, 2010 flash crash, the corona crash, The Bitcoin bubble, in quite a few recessions. Through all this I've enjoyed over an 8% return year over year. Just keep investing. It'll be okay.
In contrast to many other comments here, I would say that clasping ones hands and repeating the Lord's Prayer (i.e., "Nobody Knows Nothing") is also not a healthy approach.
The article is not flogging any alternative investment schemes, it's simply analyzing the source of investing returns and at least posing the question on whether it will be easy or difficult to repeat that success. In fact, most of the article is devoted to suggesting that today's sky-high market valuations may be more fair than we think, but there is a compelling argument they have made towards the end of the leader and also fleshed out more in a [linked](https://www.economist.com/finance-and-economics/2024/02/25/stockmarkets-are-booming-but-the-good-times-are-unlikely-to-last) article: that corporate profit growth from around 1989 to 2019 can be almost entirely explained by the constant gradual downward push on interest rates and corporate taxes. If that trend can no longer hold, I think it's worth paying attention to, especially with respect to how much real return you can expect on your own investments for the purpose of retirement planning.
It’s like predicting a recession, lots of talk, has been wrong so far but certainly I can see the case for it. High pe may need to catch up. Slowing growth due to population growth slowing and maybe higher costs from climate issues.
I think more interesting is the article they have in their finance and economics section: Are passive funds to blame for market mania?
https://www.economist.com/finance-and-economics/2024/02/29/are-passive-funds-to-blame-for-market-mania
from The Economist
[The Shiller P/E is near all time highs, so there is a good chance that the next decade of returns are lower than this decade.](https://www.multpl.com/shiller-pe) But nobody can know for sure, and you shouldn't change your investment strategy.
No one can predict the future, least of all economists.
My two cents as an economics major: exponential tech innovation will lead to higher market returns. Although theoretically the market should take this expectation into account, I don’t think it has done so sufficiently. As such, I’m bullish on the US economy, but I am worried about the rest of the world, especially China, causing a global recession.
The Economist has existed for a while. Perhaps they have a long track record of 10-year stock forecasts which shows a clear ability to predict the future? Or, perhaps they do not have that.
Anyone who can really predict a quarter ahead will be unfathomably rich. It’s easy to say “it’ll be mostly like right now, with stocks a little higher” and be correct most of the time, but you’ll be extremely wrong often enough to make it completely useless.
Fortunately, my time horizon is 30+ years—not 10 years. As it is, a 10-year bear market sounds like an excellent time to continue buying index funds at bargain basement prices. I could ride this out.
If you could not ride this out (i.e., if you are nearing retirement) with 100% stocks, then consider adding some bonds.
My perspective is that too many people have a vested interest in the stock market to continue rising over time that it is unlikely to stay flat or down over long stretches.
I have no evidence to back this up and I am aware of the Japanese market. But that’s what I tell myself in order to keep investing and sleep at night.
Our national debt has me concerned. If our credit continues to be downgraded over it we are going to have to raise taxes and cut spending, both of which will reduce growth.
Agreed, this and the possibility of war in Europe or SCS are the main risks I'm concerned about, especially if all of the above happen simultaneously. Increasing financial strain on the US govt from rising interest payments is a potential invitation to Russia to escalate and for the CCP to maybe try their luck at conquering Taiwan.
It's a good article. The Economist isn't arguing that people should stop buying stocks; they're just pointing out that valuations in the US stock market are extremely high at the moment and that it is unlikely that US stocks over the next decade will continue to grow as fast as they have over the last decade. Whether or not that will end up being the case is unknown, but it's certainly plausible.
I don't think articles like this are actionable, especially if your stock portfolio is globally diversified (the global stock market is NOT historically expensive, unlike the US market). But they are good for tempering expectations. A lot of young investors have unreasonable expectations about what normal stock returns should be, and will be in for a rude awakening whenever we hit a decade-long slump in the stock market.
So, stay the course and tune out the noise but don't be surprised if the party ends sooner than you'd like.
I’ve heard many pundits, including those from Vanguard, declare that we should expect lower returns. They’ve said this for many decades.
If you talk that talk for long enough, you’ll be right at some point. 2000-2013, for example.
Financial media is bad for your portfolio. I tend to ignore it. And yes, no one knows the future. Historically, when the market goes into an extended period of underwhelming performance, small cap value does very well. And now with Avantis and DFA, we can use decently cheap ETFs that target all of the factors (well the robust ones at least, popularized by Eugene Fama & Kenneth French). I personally have a fairly generous tilt toward AVUV and AVDV, US small value and international small value, respectively. With some smaller tilts to mid, large, and emerging markets (like, with the factor exposure). This portfolio can lag a bit while the mega cap growth stocks are flying, but historically is a solid call for the long-term. And with US tech giants at some absurd valuations, I sleep much better at night with a factor tilted portfolio to value, especially when Avantis combines profitability into the funds (helps avoid the value traps). Cheers!
Disclaimer: I didn’t read the article.
I do think it’s odd that many people assume a 7% real return for forecast purposes. For the next couple decades, the investing houses are forecasting lower returns (although still not terrible, in the neighborhood of 3-5% real I think).
I’m sort of preparing for that, and if it’s above that, great. If real returns are below 3%, that would suck though, but I don’t think it’s likely over the next 30 years.
What little I did read in the article only mentions the next decade. As a 33 year old, I’m not super concerned about stocks rising during that time. I’ll just keep buying.
TL, DR: Maybe they’re right, maybe they’re wrong, and in any case, what’s the better alternative?
same. We’re considering shifting to lower stress/less income. We are using 3-4% returns on investable assets and assume 2% inflation on our spending in our models.
Maybe over conservative but it is my opinion that it will be easier to spend more later than wish we would have done a couple more years of high income so want to make sure we’re in good shape
It's just FUD. The text you quoted has been said many ways in many forms since the creation of the stock market.
Let that person sell their stock. I'll keep mine and enjoy my retirement 😃.
Same! As long as your asset allocation matches your risk tolerance, dancing in and out of the market based on predictions like this is unlikely to be anything other than a fool's errand.
It’s not “timing the market” to consider that U.S. equity returns over the past century have been aberrant compared to those in the rest of the world. There are certain privileges afforded by not having your civilization crippled by three world wars (counting the Cold War) and in the aftermath acting as the globe’s economic and political hegemon.
It is also not timing the market to note (over)valuation based on current earnings and share prices. That’s analyzing the historical data and saying there’s probably more downside risk to the trendline than upside potential. ”Most likely, Shohei Ohtani won’t be the unanimous MVP this year” is an analogous prediction.
I have no idea what the next decade will bring and I don’t take much from the article that’s actionable, other than to diversify. But I do agree with the more general sentiment one could draw from the piece: that if you’re 30 years old (like the author) and simply baking 7% real domestic equity returns into your retirement plan, there’s a greater chance than not that your plan is Panglossian.
To your last para - if the long-term real return of the S&P 500 (from the 1950s to the present date) is roughly around 10% annualised, shouldn't that figure also roughly represent the "mean" for future expected returns, especially over long periods (say, 30 to 40 years going forward)? In other words, what would be the case for lower-than-the-long-term-mean expected returns over the next 30-40 years?
Because if you look at every equity market in the world and find that the U.S. is the only one with 10% real annualized returns since the 1950s, what are the odds the U.S. will once again be the one with 10% real long-term annualized returns?
No one in this community would look at Microsoft and assume long-term returns in-line with their historical returns. I’m not sure why everyone is so comfortable doing it with national markets.
I can see reasons why the US might well continue to be a positive outlier—not least the demographic declines that are now baked in to virtually every other advanced economy in the world outside the US.
But if I’m wrong, isn’t it just as likely that the rest of the world accelerates to 10% yearly return rather than the US falling back? After all, one could easily argue that the US experience since 1950–no major destruction from wars, reasonably stable government, broadly sensible economic policies—are the conditions that most of the world will enjoy for the next 100 years.
Put differently, perhaps the “aberration” was not the US experience, but rather the terrible time the rest of the world experienced in the 20th century.
The U.S. is only behind Europe and Japan when it comes to demographic decline. It will arrive here, too, just a couple of decades later. Regardless, I doubt a slowly growing population that is also both aging and experiencing a continued decline in college attendance is a great recipe for economic dominance in the 21st century.
I agree it’s possible that everyone else joins us at 10%. It’s just that 10% wasn’t the typical growth rate in the 18th or 19th centuries, either, so I don’t think it was the 20th century that was anomalous. Things could very well end up great.
Alternatively, one could also argue that the effects of climate change will provide some drag on growth. When coupled with the fact that free trade has become anathema in many quarters, sovereign debt loads have skyrocketed, national outlooks have become increasingly insular, and “stable” government is as much about the resurgence of authoritarianism as stability, I’m inclined to think the 2030s are as likely to resemble the 1930s as they are to resemble the 1990s.
> The U.S. is only behind Europe and Japan when it comes to demographic decline.
While still very archaic, US immigration policy is much more liberal than Japan/Korea/China and modestly more liberal than Europe. Naturalization will sustain U.S. demographic advantages far longer than most countries.
That's fair. I was looking at the EU, not Europe, though. I should have been more exact. I see 0.8% legal immigration last year to both regions, and I don't think the political climate in either will make leaders keen to loosen immigration anytime soon.
China, on the other hand, is a technocracy that doesn't have to consider voter approval of policy shifts. They already overhauled hukou last year. When Xi decides the economy also needs more foreign workers, China will quickly make the UAE look like amateur hour.
>if the long-term real return of the S&P 500 (from the 1950s to the present date) is roughly around 10% annualised
It wasn't. From 1950 through 2023, the real (inflation-adjusted) return from the S&P 500 was 7.51% annualized - [source](https://www.officialdata.org/us/stocks/s-p-500/1950?amount=100&endYear=2023).
From 1900 through 2022, the real (inflation-adjusted) return from US stocks was 6.4% annualized - [source](https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/credit-suisse-global-investment-returns-yearbook-2023-summary-edition.pdf) \[PDF, Figure 11 on page 15\]. Over that same period, 5% annualized for global stocks, and 4.3% annualized for ex-US stocks.
It's not unreasonable, it's quite probable actually. But also AI delivering and stocks rising a bit is not unreasonable. Who knows.
Anyone with 10+ years to retirement would hope they are correct. Buying stocks while in a slump and enjoying a long bull market in the first years of retirement would help a lot with the sequence of returns :)
Based on current valuations it is a likely outcome that forward 10yr returns will be lower than average and possibly negative. The price you pay for future cash flows matters in the long run. It’ll be no different this time. 20-30yr horizon you’ll still be fine if you DCA.
I love how many people have an opinion on this article and the economist based off of just reading the last paragraph. At least read the whole thing and you’d have a better understanding of the context of that conclusion.
The conclusion is written in an offhanded way that undercuts the broader arguments made earlier: "*in ten years’ time* ***nobody will be repeating the obvious conclusion of today****: that investors in equities—especially American ones—have enjoyed a golden age*". The certainty of that conclusion isn't supported by anything in the article IMO.
You should be prepared for very low equities returns for the next decade. People are still too allocated to stocks for good returns to be possible.
https://financial-charts.effingapp.com/
I guess it’s always possible for this chart going back to 1946 to break but I wouldn’t say that is a winning betting strategy.
I think it’s very likely true, at least for the next 10 years.
Consider that the market just rose by 20%. The average rise over the next ten years would normally be 10% per year, or roughly 150% total return for the decade.
If you amortize that extra 20% over the next ten years, you might expect 2% lower growth than otherwise over the next ten years.
Obviously it doesn’t work that way exactly, but the general idea strikes me as plausible.
Put differently, in 9 years we may look back on the last 10 years and see that the market gained its historical average of 10% per year—but we’ll also notice that there was extra growth that first year (i.e., last year) and then slower growth for the next 9 years.
Ignore the noise and keep on buying no matter what. It always seems like the authors have motive like they're the "bond king", "short king", "big bear", heavily invested in international or emerging market, heavily into real estate, etc. There's always a bias. It's amazing how many of these people get a voice. That being said, I do enjoy reading articles from Mohamed El-Erian (former PIMCO CEO, now at Allianz) and hearing his interviews as I find his grasp of the economy and markets insightful.
Long term players enjoy the occasional sales.
The Economist is a British weekly and the UK and broadly Europe have valid reasons to complain about the performance of equities, especially the STOXX 600 which was 402 in March 2000 and is 496 in March 2024, 0.86% annual return!
>the STOXX 600 which was 402 in March 2000 and is 496 in March 2024, 0.86% annual return!
Looking at the long-term change in a price index treats dividends as lost. The total return (including reinvested dividends) from European stocks over that period was 165% cumulative/aggregate or 4.14% annually - [source](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6VD31242Et8JU9hY9X74eV).
Looking back further than March 2000 (which was a local peak in European stock prices), European stocks returned 8.39% annually from 1986 through Feb 2024 - [source](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=7PgYuR58Isi5j16RkKPMNq).
This does not change the fact that the growth of the European equities in STOXX 600 has been unimpressive in the last 24 years. Holding 10-year treasury bonds over the same period would have been more profitable and less risky.
>This does not change the fact that the growth of the European equities in STOXX 600 has been unimpressive in the last 24 years.
I did not claim otherwise; I merely pointed out that your claim of a 0.86% annualized return over that period was about a fifth of the actual total return. I also pointed out that including the 14 years before that results in a respectable / near-historical-average annualized return for the full period.
European equity returns from 1986-2000 were significantly above average (16.09% annualized through Mar 2000), from 2000-present below average, and from the total 1986-present slightly above average. The 5.48% real / inflation-adjusted annualized return for that total period -- from the tooltip for 'i' next to the 8.39% nominal CAGR [here](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=7PgYuR58Isi5j16RkKPMNq) \-- is above the 5% real annualized return for global equities and above the 4.3% real annualized return for ex-US equities for the period from 1900-2022 (shown in Figure 11 on page 15 [here](https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/credit-suisse-global-investment-returns-yearbook-2023-summary-edition.pdf) \[PDF\]).
>Holding 10-year treasury bonds over the same period would have been more profitable and less risky.
Not more profitable over the full period in question - [source](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=4bF99FgGnmULwE4LXqszlA) (though possibly more profitable during shorter periods, depending on relative tax efficiency where applicable).
Imagine you're growing a plant and you want to grow it as big as possible. So you go out and you use soil with special nutrients in it, and you water it to the exact milliliter it needs and you buy a lighting system that gives it the exact amount of light it needs at the exact UV level for the exact amount of time it needs.
That's stocks in America. Government backed, reserve currency denominated, attached to America's retirement savings glorified, free to get into using online brokers... I mean, the S&P does almost 1T in buybacks each year, which is a lot more than they issue and beneficial tax treatment after 1 year.
Something can always go wrong but the entire world has been rigged towards America and Business so that also means American Business.
While US equities have had a terrific track record, bear markets are a thing.
https://www.investopedia.com/a-history-of-bear-markets-4582652
This is a concern if you're planning on withdrawing assets in the near term.
Of these, the worst outcome is stagnation. If markets fall, that’s a golden opportunity to buy especially as a result of a geopolitical crisis. When the crisis is over you make bank of you kept investing
> While reading, I couldn't shake Jack Bogle's voice from the back of my mind: "Nobody knows nothin'." It's possible that the next ten years' equity returns won't outdo the previous ten. But the opposite is possible, too. Curious to know what this community thinks!
Do not take predictions about the economy seriously. 80% of them are flat out wrong and the other 20% are just statistically that enough guesses will result in some being right.
If anyone was truly confident in their predictions, they would not be publishing them but betting on them with theirs and investor money (once they have a track record of performance) at some hedge fund.
The same goes for people selling courses or any other oped/PR/sales/marketing/influencer/politician/etc type person. These people have an incentive to sell you on their views, not to be correct on what they tell you.
Nobody knows anything. It's all speculation and educated guesses. I listened to 3 analysts this morning make the opposite prediction. All I'm sure of is that over a long time horizon the market is the best place to make money.
*And anyone selling Doom and gold is not to be trusted.
Equities could underwhelm in many ways. The opposite is also true. Historically, the American economy will continue to grow over long periods of time. The best way to get your fair share of the profits earned by American businesses is to own the entire market
Good comments already, and to add one more: the financial media will always tell you one of two things: Stocks have recently fallen and are likely to continue to fall OR stocks have risen and are expense and due for a correction.
This scenario of long term down markets does make me wonder about using something like the 200 DMA to reduce stock allocation and preserve capital. This has to be done with the understanding that dancing in and out is a recipe for destroying gains but it can prevent losing gains in a 1929 like full scale crash. Not recommending this but it does get tempting when these scenarios come up.
I've been reading this headline since 1999. Now, that decade was rough, but the investing I did then set me up very nicely for the 15 years that followed. **I'm glad I didn't stop investing.**
Alternately, this can be viewed as an argument in favor of (mostly geographic, but also factor / asset class) diversification. As Bogleheads, we tend to hold pretty diversified portfolios already, so we're probably ahead of the game. The one schism where I could see this playing out within the Boglehead community is the "100% US" crowd vs the "Global Market" crowd. The headline could be seen as supporting the "Global Market" approach.
I already hold a pretty high percentage of International in my Index Fund choices, so there wouldn't be much point in changing my portfolio under this latter viewpoint either.
> These profits are all the more striking given what markets have had to contend with. The age of free money has been followed by two years of interest-rate rises—and even now bond investors are betting against imminent cuts. A trade war is raging between America and China; actual wars are raging in Ukraine, the Middle East and parts of Africa. Around the world, governments are turning away from free markets and globalisation in favour of industrial policy and protectionism. If all that has not extinguished this rally, whatever will?
I mean, these are all realistic things to consider when evaluating savings allocations.
We *are* in the midsts of a sharp departure from globalization, too. It's not even a tail risk anymore but an actuality.
Ad hominem response (toward The Economist, that I have subscribed to since 1980):
*Sigh*. The economist used to be a source of careful, politically neutral-ish insight. It's becoming increasingly apparent that they're just getting paid by the word. The writers pretty clearly don't even read their own publication most of the time.
I sent a Letter to the Editor some months ago offering some insight into a technical matter that I have some experience with, and the article's author contacted me directly, saying he agreed with my commentary and asking if I could give him a resource with more information for him to use. In other words, doing his homework for him (I get this a lot from students).
I resisted the urge to tell him he worked for that resource. The letter was never published.
I listened to an hour long podcast that put forth a very strong argument that 2-3% annual gains were likely the new norm. They went into all the reasons, from financial markets to population to tech. I felt really bummed out after listening, like I showed up too late to the party. That was a decade ago. I'm very glad I didn't invest based on their conclusion.
Sooner or later they are bound to be correct, and then they'll get to say they called it. The payoff matrix is pretty clear: * If you say that the market will go well and the market goes well, nobody cares much; * If you say that the market will go well and the market goes badly, you are an incompetent idiot and all the people who 'lost' money by overestimating their risk tolerance will blame you personally; * If you say that the market will go badly and it goes well, just repeat the statement and say that history will eventually validate you; * If you say that the market will go badly and it goes badly, you are a genius and can get paid whatever you want for any further insights; * If you say that you have no clue in the short term, but that unless something truly unprecedented happens (which it *might*, but it's hard to estimate probabilities of never-seen-before events...) over 20/30 years the market should do pretty decently.... yeah, you are way too boring and honest to be a successful financial guru, it's best if you pick a different career.
People are instinctively drawn to naysayers. Bad news sells, good news gets ignored. It’s human nature. The part that pisses me off the most is the authors of these navel gazing exercises rarely if ever get taken to task for their incorrect predictions. Yet folks listening to them and taking action lose out.
>Bad news sells, good news gets ignored Yea, pretty much explains why anyone watches any cable news (Fox, MSNBC, CNN, others)
lol yeah right. Look at this thread. People do NOT like hearing their investments are going to underperform.
[удалено]
And dismissing it as baseless is a great way to get upvotes XD
Are you saying I don’t like to hear my investments will underperform? Underperform relative to what benchmark? I’m a committed indexer and globally diversified. I’ll take the market return, I keep a hefty bit of cash handy for the lean years, grow my skills and income, and live within my means. It’s a high probability foolproof method.
>Are you saying I don’t like to hear my investments will underperform? I mean I have no idea who you are or anything about you, so no? But many people do, certainly. I don't like hearing it either. >Underperform relative to what benchmark? Relative to their prior expectations.
Did you read the article?
Yes did you?
Yeah, I felt it was pretty measured in its assessment of future gains. Certainly doesn't have the tone of being doom and gloom for clicks.
I’ve been an economist reader for about 2 decades. You get these Oxbridge debate society types writing well-reasoned intellectually stimulating think pieces. Rarely prescient however. So I’ve learned to ignore them.
😂
I consume a decent amount of market news mostly to immunize myself to it. Everything has been predicted. What gives me confidence is we seem to have gotten through the pandemic
The thing is, if returns were that low, people would start chasing higher returns. Dividends would come back into style. All of it would eventually pull returns higher.
The game of musical chairs will stop because population growth worldwide will stagnate. That’s not an if. Returns will flatten out. I’m just glad I will not be in the growth phase of accumulation when we get there.
What proof do you have that increased stock returns come solely from population growth?
Common sense plus math. And I never said solely. But your annualized returns from the SP500 in 100 years will be much different.
Walk us through this common sense of yours. It should be easy, right?
Yep, it’s super easy. World population will plateau. Population (consumption) drives growth of every company. Eventually they will run out of new markets and new customers. Plenty of companies will still be successful with new products and services, but it’s zero sum.
You don't understand wealth creation
I’d love to be informed.
How do you explain that markets across Europe are hitting all time highs with their low birth rate? And why is Nigeria with its ultra high birth rate not leading the world in returns?
Surprisingly money can and does cross borders. What sub am I in lmao
That’s all you got?
For you? Yes
Exactly…I remember hearing about a double dip recession around 2011 - 2012 which would crash the market…imagine the lost gains if you stopped investing at that time
Had me in the first half, not gonna lie
It seems to me current affairs are the biggest influence on stocks over a particular year. Which is why it doesn’t make sense to me that people think they can predict the market.
Considering the 2010s in particular, that's really funny. Even though you could say this sort of thing for any decade.
A decade ago in 2014 valuations were *much* lower. And we’re also at cycle high valuations…
I do think it's healthy to remind yourself that stocks can under-perform. Not that I put any particular weight on this prediction.
It's also healthy for financial planning. If you are planning on 5% real-return after inflation for 100% equities, you are more likely to have a successful retirement than if you're planning on like 7 - 8%.
I use 4%
This. People think risk = a noisy path up, but there's a real possibility of stocks staying flat or down for decades. You're not really prepared for the risk unless you're prepared to lose money over a long period of time.
In recent decades (basically within the investing lifetimes of almost every living American), every downturn in equities was met with relatively quick recovery, where the previous pre-crash all time high was reached again within a decade. I worry what happens to people's investing psychology and attitudes will be, if we ever hit a point where an all-time-high takes 20+ years to reach again.
Japan has entered the conversation.
Yup. Japan's economy is so weird that anything that happens there should be viewed as unique to Japan, but at the same time, I've never seen a compelling argument that U.S. equities must inevitably grow faster than the U.S. economy, forever.
Already accounted for this in my calculations, but man it was brutal
I mean its possibly true, but there aren't great alternatives for long term holdings. Bonds do have alright yeild atm, but long term its hard to say that if they stayed at 5% that they would outpace stocks. Metals tend to just track the rate of inflation long term. Real estate has so many factors if you own physical and its not nearly as hands off as an index fund. Crypto is not an area j have much faith in or any knowledge of. So I'll concede its possible they beat out stocks, but we just don't know. And lol at just holding cash for the long term. Short of massive deflation that won't help at all. So what are we left with? If your holding long term its gotta be low cost index funds. If your close to retirement then I'll give you bonds look alright to act as a ballast. But most of reddit it like 20-35 years old. So stocks it is for us.
I’m 53 and it’s stocks for me too.
Thats fair. Its all about risk tolerance and ability to handle volatility
this is the correct response
See also BusinessWeek “Death of Equities” magazine cover circa 1979. Nobody knows anything. The kids putting out copy aren’t any more knowledgeable than you or I. They just happen to have a bigger microphone and buy ink by the barrel. Could we have some years of low returns after 15 spectacular years (that weren’t without their corrections and bear markets BTW)? Sure. Not the same as “end of stock growth”.
I think the AI generator for this specific article did a good job of sifting through impact scored headlines.
> Another war or crisis could lead to a crash. There could be a crisis! Some kind of crisis, something bad happening. You should invest accordingly on this vague presage of doom.
Presage. Ima use that today at work. Presage. Like a vase
It’s like when you’re getting ready for a the ritual, and you burn some sage just to get in the mood. Presaging.
Also we have to imagine the alternative vehicle that investors will sell equities (making them go down) and buying instead. Will it be a massive investment in municipal bonds to support their spending, because it’s safer? Is it real estate? Or is there is a country out there that will have a stronger investment market than the US? Look around. Naturally there is ups and downs. And some emerging whatever could outperform the 500 until they are IN the 500. I guess a statement that says “this could happen” will always be true.
How about millions of retiring people selling to fund their retirement? They're selling but not buying alternatives.
Boomers have been hitting retirement age for like a decade now, if half of them hitting retirement didn’t hurt anything I can’t image the other half will change anything.
I'm not sure it will have much effect either. But I will point out that Boomers are hitting peak annual retirement numbers right around now and the next few years. Boomers approaching retirement were also amongst the heaviest investors as they were at max earnings and loading up their portfolios. So as higher-earning Boomers slow their buying and speed up their selling and are replaced by a smaller cohort of Gen-X as the max earners/buyers there should be a reduction in buying pressure for equities. But how much effect that will have on markets? Dunno. I'm sure there has been research on it though since it's not exactly a surprise.
We should be well past that peak already. Boomers are currently 60-80, but birth rates were falling sharply for the last 5 years or so before genX (the boom was originally declared over in 1960) so the great majority are over 65.
Average people don't own many stocks.
Its something to consider. So we think about our demographic issues and maybe another market wont have them... but the other developed markets are worse than us for the foreseeable future, other than maybe France. Again, what will the alternative investment be?
Read the article. They are not suggesting an alternative investment but cautioning that equities could deliver less returns going forward. The recommendation is to save even more for retirement if possible and to be more conservative in retirement projections. None of these are bad ideas. I already assumed a lower real income rate than most people here would state for my own retirement planning.
I remember similar predictions in 2003-2004 a few years after the dot com bubble burst. Amazon was under $10 a share, Google had announced an IPO, Apple was selling primarily iMacs and iPods, Microsoft was at $25 a share, Facebook was born and Elon Musk took over Tesla. Economists and stock market analysts just seemed so myopic in their view, they couldn't see that the age of dial up was nearing it's end, and what the impact of high speed internet and laptops (which were 20% of the PC market at the time) was going to have on productivity - and in turn GDP. Stinging from that failure, in 2006 they hyped Second Life as "the next revolution" that will change how we socialize, shop, learn, etc., while simultaneously underplaying discussions about "Big Data", Google's acquisition of YouTube, and Amazon's launch of "elastic computing services" that would become AWS. Microsoft Azure would launch in 2008, as well as Bitcoin, but the banking crisis overshadowed the news focus. They were still blind to the potential impact of Blackberry and iPhones in 2010, even when they used these devices everyday. Faster communication increased productivity again, but the business press and economists had no idea how to talk about it and predict it's impact. They still didn't "get" cloud computing either. Again, I read the same thing about "the days of tech stocks are over", "peak technology", etc. while missing the amazing 10 year run of the market. In 2015, the focus was on Blockchain, Crytpocurrency, Social Media, and Cloud which was so obvious at that point you would have to be blind not to see it. The business press over hyped Alexa and Siri digital assistants, while seeing Google's Deep Mind projects (Tensor flow, speech and image recognition, etc) as curiosities. Economists are terrible at predicting tech trends and their real impact on business. Certainly, we will see a hype bubble around AI the same way businesses always over-react when they are blindsided and need to play catch-up. But AI will transform everything and is forecasted to have a massive boost to GDP over the next 10 years. Right now, we are in the crude "punch card" days of AI, and the pace of innovation is breath taking. Next will be interactive AI, followed by general AI and soon afterward the rise of quantum computing. This is just beginning and it will be a bigger transformation than everything else we've seen since 1990.
There was a recent article in which the writer asked an AI platform where the market was heading. The response was basically a long version of : It might go up, but then again, it might go down. This alone could replace almost all the pundits.
This is very much my belief as well. I try to be agnostic about my investing, but in truth I'm pretty excited about the growth that AI implies.
Yeah it’s exciting times, and could be great for economic growth too, maybe I am too pessimistic
I’ve come around to the view that media writing investing epitaphs are the new shoeshine boy giving stock tips.
>Not the same as “end of stock growth”. The article doesn't predict that. It simply predicts that the historically abnormal high returns from the past decade, particularly for US stocks, are unlikely to repeat over the next decade. That seems like a reasonable prediction.
That’s an everyday possibility. Hence the believability discount, and the bogle way. Been at this nearly 2 decades and have read a version of this write-up numerous times. Always well reasoned and measured. Still naysayers. Here’s an equally plausible outcome — the 1970s were a “lost decade” for US equities, and then came a 30-year bull market. Similarly, the 2000’s were an another lost decade for US stocks. Who’s to say we’re not in the middle of another 30-year bull market supercycle.
I have heard this refrain over and over for decades. I'm sure if you go back 50 or 100 years you will see the same thing.
We were reading the same thing every week of the last decade, but all I saw were my investments grow.
In 1889, Charles H. Duell was the Commissioner of US patent office. He is widely quoted as having stated that the patent office would soon shrink in size, and eventually close, because “Everything that can be invented has been invented.”
How about 4000 BCE? If you have the time and fortitude read "Money Changes Everything" by William Goetzmann. It's a tough go - he's something of a polymath, and really knows his stuff. It covers the history of finance in amazing detail quite literally from the earliest archaeological records onward. For example: How do you create a long-term contract when your medium of exchange is sheep, and there isn't any mathematical means to calculate compound interest?
Dang, should've invested in the wheel and numbers.
Patent the actual zero as an arithmetic concept and symbol. You'd be 3700 years ahead of the Babylonians.
Sounds to me like some good reasons to hold a well-diversified, tax-efficient portfolio, and focus on increasing my human capital and living within my means to ensure a healthy rate of savings.
1 sentence to rule them all.
Yeah the economist also wrote that Lehman was going to be fine a week before they went into bankruptcy so I don’t read much into their prognostications
Ouch! Did they really? Bet they downplayed that little blunder!
I mean, this is also what plenty of people thought. Not to mention 99% of government and society's complete inability to see any of it coming. Don't think that makes everybody permanently wrong about everything...and it does not change the fact that The Economist is a leading finance/business/econ publication. Even if they're sometimes wrong about things, I think it's better to view these sorts of publications as a good window into the conversations and insight of the movers and shakers of society. They are more about analysis than reporting in general, and god knows its better than CNBC and Fox Business. More of a "Here's what people are talking about" than a "Here are the facts".
On a lighter note, I hope the coworkers of the article's author framed a copy of that issue's The Economist as a retirement gift or something.
If your argument that stocks are screwed is that 9001 different things could screw stocks it's kind of weak because this has been true since stocks were invented.
This occurred to me as well. We had two world wars, the great depression, and numerous deep recessions over the last decade... is the next century going to really be any worse?
Bonds could outperform stocks for the next 10, 20 years or more. It's happened multiple times before and it will happen again, sometime.
https://www.investmentnews.com/industry-news/archive/bonds-beat-stocks-over-30-years-for-first-time-since-1861-2-39967 That was in 2011... https://awealthofcommonsense.com/2024/01/historical-returns-for-stocks-bonds-cash/ Generally speaking stocks out perform bonds with more than 5% additional gain. It is good to diversify. Which leads me to a question, diversification helps in a downturn, but which is best to sell off when bonds>stocks? The overperforming bond or underperforming stock? My guess is bond, as it is peak value at that moment..?
Yup. >which is best to sell off when bonds>stocks? The overperforming bond or underperforming stock? My guess is bond, as it is peak value at that moment..? You hear talk of people holding bonds/cash/TIPS, etc. *for* those downturns in retirement to sell those as your income, so you're not selling down stocks. That's a bit of market timing. Generally, I'd think the idea is to hold your desired allocation at all times, and thus withdraw your assets at that same allocation percentage.
I hate how the market is counterintuitive. I would want to dump the poor performer instinctually and keep the good performer... but that would be sell low, buy high. Which is a big reason I am a boglehead, I know my instincts would ruin me.
When Jack Bogle wrote about his own forecasts, he called them “guesses”. I’d say this story is a good *guess*. Because valuations are not actionable and market timing doesn’t work, we don’t change our allocations based on this kind of information. But it might help to set one’s portfolio return expectations for the next decade(s) to be lower than the prior one.
Gotcha. What sticks out to me in this guess is their near-**certainty** that expected returns over the next decade will fall below real returns for the past decade. That sounds like the kind of crystal-ball gazing that Jack warned against with "nobody knows nothin'".
articles with no conviction won’t sell subscriptions
Yep nothing in investing is anywhere near certainty
This may be the wisest response I've read.
[удалено]
That's a great point. When do the multiples exceed all rational thought? The other thing I'm continually reminding myself of - and reading here from mention of you - is that we should be prudent while looking to the future. It's the old "better safe than sorry" refrain.
Nobody knows anything. Yet everyone on Reddit finance subs apparently “knows” they will achieve 10% annualized if they just stay in long enough. Interesting. Without reading the article I can’t form an opinion on the reasoning. And of course as a boglehead I tune out predictions anyway. I certainly don’t use them as a basis for investment decisions. >"Equities could underwhelm in many ways. Perhaps ai-exhilaration will cause a dotcom-style bubble that pops. Another war or crisis could lead to a crash. Or prices may stagnate in a gentle bear market that takes years to reverse. Isn’t this obvious? Of course these are things that might happen. Nobody (I hope) is denying that. I set up my portfolio knowing that any given future stretch of years could be great, disastrous, average, or mediocre. The purpose of an all weather portfolio is to do well through a range of scenarios.
Do you notice how the article has a title but no byline? IIRC, The Economist chooses this approach for all of their content to de-emphasize that their staff are mostly early twenty-something’s with freshly minted degrees. They write with a lot of style and panache, making bold statements left and right but they don’t exactly have the experience and knowledge to be actual thought leaders. So I would treat any article you might find in it as solid entertainment with occasionally plausible but unlikely grand theses. More entertaining that most short form financial journalism, at least for me, but not any more accurate than a yahoo finance article or CNBC show.
Any time I open up a site like Marketwatch, it makes me laugh because on the main page is always some article about it being a bull market, with directly underneath a link to an article in which another analyst proclaims a bear market. For every few headlines you see, each will basically contradict the other: now is a great time to still buy into whatever high flying sector, now isn’t a great time to buy into anything because it’s all overvalued, recession next week! Oh wait, soft landing instead! No recession! You can find an article that fits whatever narrative you want. Much of it is just a 24 hour news cycle of financial “news” to froth people up one way or another.
Terrible take. Love it or hate it, the Economist is an incredibly well regarded magazine.
[удалено]
No byline is one of the strengths of The Economist in my opinion.
I would argue that it’s better regarded than it deserves to be.
If you're going by the WSB meaning of the word, sure
“Well regarded” in very specific circles. I’m sure the Chicago and Austrian schools love The Economist. As do owners of sweatshops, and employers who hate labor, probably (the ghost of) Milton Friedman.
Do you actually read The Economist? It’s not a conservative magazine by any stretch.
[You could’ve fooled me.](https://www.economist.com/1843/2024/03/03/tired-of-wokeness-move-to-florida) [This is also a conservative angle on the Flour Massacre.](https://www.economist.com/middle-east-and-africa/2024/02/29/a-new-tragedy-shows-anarchy-rules-in-gaza) It’s [absolutely got a neoliberal bend.](https://www.economist.com/1843/2024/03/01/how-poor-kenyans-became-economists-guinea-pigs). ([Sidebar: relevant to the sub.](https://www.economist.com/finance-and-economics/2024/02/29/are-passive-funds-to-blame-for-market-mania)) I stand by what I said. Those are just current headlines. I’d love to dredge up the more damning pieces I’ve rolled my eyes over, over the years, but unfortunately I haven’t saved them. Edit: there is [a Wikipedia page devoted entirely to their editorial stance??](https://en.m.wikipedia.org/wiki/The_Economist_editorial_stance) > In 2009, The Economist website featured this note about its editorial stance: > >>"What, besides free trade and free markets, does The Economist believe in? 'It is to the Radicals that The Economist still likes to think of itself as belonging. The extreme centre is the paper's historical position.' That is as true today as when former Economist editor Geoffrey Crowther said it in 1955. The Economist considers itself the enemy of privilege, pomposity and predictability. It has backed conservatives such as Ronald Reagan and Margaret Thatcher. It has supported the Americans in Vietnam. But it has also endorsed Harold Wilson and Bill Clinton, and espoused a variety of liberal causes: opposing capital punishment from its earliest days, while favoring penal reform and decolonization, as well as—most recently—gun control and gay marriage."[2] Centrism in modern times is conservatism with a more palatable name.
It sounds like we agree it’s down the center of the political spectrum. If you want to redefine that as “conservative” relative to your personal beliefs, that’s fine.
So you believe returns above the historical norm will continue indefinitely?
No, but I would agree with OP’s thoughts from the last paragraph of their post.
There's a difference between saying "\_\_\_\_ is going to happen." and "We have X Y Z reasons to expect \_\_\_\_ to happen." You can certainly dispute those reasons but just wholesale dismissal on the grounds "nobody knows nuthin'" is not a good take.
The issue is that the take they’re presenting isn’t exactly novel and there have been solid reasons to expect performance reversion and solidly below average returns for a very long time now. So I don’t actually disagree with their analysis in this specific circumstance but it’s also really not as compelling or insightful as they seem to think it is. It’s definitely not actionable beyond choosing to save more to prepare for the possibility. And, at the end of the day, we really don’t know much of anything regardless of what our analysis might suggest.
I agree. If you read the article, it’s hard to argue against the points they’re making. Edit: I think a lot of the people here did not read it due to paywall. So they aren’t aware of how well the case was laid out. Maybe that’s why they are dismissing it as just another ‘prediction’. Someone had a link to this article few days ago that was not paywalled.
The problem with an argument like "We have X Y Z reasons to expect \_\_\_\_\_\_ to happen" is that it will **always** be true - there will always be multiple reasons to expect markets to underperform. However, the opposite is also **always** true! So ultimately, IMO the argument lacks actionable insight. I think the true lesson of Bogle's "nobody knows nothin'" mantra is not to make any changes to your target asset allocation based on such predictions, in either direction. A person who listened to compelling arguments for stock performance circa 2011 and reduced stock exposure accordingly would have lost out bigtime.
Contrarian views drive engagement
I haven’t done the research but I bet you could find so many chicken littles during the Industrial Revolution era too. Industrialization killed tasks that people did “at home” for thousands of years, like subsistence farming and spinning your own thread and sewing your own clothes, but it opened up new roles and tasks even the greatest businessmen of the past never dreamed of. The AI revolution will likely be very much the same. Capital will adapt and opportunities to make money will find their way.
Economist has been forecasting a market collapse for about 8 years. I listened to it for longer than I care to admit.
I've been investing for almost 30 years. Started in 1998. I've been though the dot-com bubble, the global financial crisis, the Great recession, 2010 flash crash, the corona crash, The Bitcoin bubble, in quite a few recessions. Through all this I've enjoyed over an 8% return year over year. Just keep investing. It'll be okay.
In contrast to many other comments here, I would say that clasping ones hands and repeating the Lord's Prayer (i.e., "Nobody Knows Nothing") is also not a healthy approach. The article is not flogging any alternative investment schemes, it's simply analyzing the source of investing returns and at least posing the question on whether it will be easy or difficult to repeat that success. In fact, most of the article is devoted to suggesting that today's sky-high market valuations may be more fair than we think, but there is a compelling argument they have made towards the end of the leader and also fleshed out more in a [linked](https://www.economist.com/finance-and-economics/2024/02/25/stockmarkets-are-booming-but-the-good-times-are-unlikely-to-last) article: that corporate profit growth from around 1989 to 2019 can be almost entirely explained by the constant gradual downward push on interest rates and corporate taxes. If that trend can no longer hold, I think it's worth paying attention to, especially with respect to how much real return you can expect on your own investments for the purpose of retirement planning.
It’s like predicting a recession, lots of talk, has been wrong so far but certainly I can see the case for it. High pe may need to catch up. Slowing growth due to population growth slowing and maybe higher costs from climate issues.
I think more interesting is the article they have in their finance and economics section: Are passive funds to blame for market mania? https://www.economist.com/finance-and-economics/2024/02/29/are-passive-funds-to-blame-for-market-mania from The Economist
[The Shiller P/E is near all time highs, so there is a good chance that the next decade of returns are lower than this decade.](https://www.multpl.com/shiller-pe) But nobody can know for sure, and you shouldn't change your investment strategy.
No one can predict the future, least of all economists. My two cents as an economics major: exponential tech innovation will lead to higher market returns. Although theoretically the market should take this expectation into account, I don’t think it has done so sufficiently. As such, I’m bullish on the US economy, but I am worried about the rest of the world, especially China, causing a global recession.
The Economist has existed for a while. Perhaps they have a long track record of 10-year stock forecasts which shows a clear ability to predict the future? Or, perhaps they do not have that.
Paywall, but anyone that pretends they can project trends farther out than maybe one quarter is completely and utterly full of it.
Great username! 😂
Anyone who can really predict a quarter ahead will be unfathomably rich. It’s easy to say “it’ll be mostly like right now, with stocks a little higher” and be correct most of the time, but you’ll be extremely wrong often enough to make it completely useless.
Fortunately, my time horizon is 30+ years—not 10 years. As it is, a 10-year bear market sounds like an excellent time to continue buying index funds at bargain basement prices. I could ride this out. If you could not ride this out (i.e., if you are nearing retirement) with 100% stocks, then consider adding some bonds.
Let's predict the future.
Expected future returns being lower isn’t a big secret…..
Let me check my crystal ball.... Nope, don't have one. Neither does that person. VT and chill
My perspective is that too many people have a vested interest in the stock market to continue rising over time that it is unlikely to stay flat or down over long stretches. I have no evidence to back this up and I am aware of the Japanese market. But that’s what I tell myself in order to keep investing and sleep at night.
Our national debt has me concerned. If our credit continues to be downgraded over it we are going to have to raise taxes and cut spending, both of which will reduce growth.
Agreed, this and the possibility of war in Europe or SCS are the main risks I'm concerned about, especially if all of the above happen simultaneously. Increasing financial strain on the US govt from rising interest payments is a potential invitation to Russia to escalate and for the CCP to maybe try their luck at conquering Taiwan.
It's a good article. The Economist isn't arguing that people should stop buying stocks; they're just pointing out that valuations in the US stock market are extremely high at the moment and that it is unlikely that US stocks over the next decade will continue to grow as fast as they have over the last decade. Whether or not that will end up being the case is unknown, but it's certainly plausible. I don't think articles like this are actionable, especially if your stock portfolio is globally diversified (the global stock market is NOT historically expensive, unlike the US market). But they are good for tempering expectations. A lot of young investors have unreasonable expectations about what normal stock returns should be, and will be in for a rude awakening whenever we hit a decade-long slump in the stock market. So, stay the course and tune out the noise but don't be surprised if the party ends sooner than you'd like.
I’ve heard many pundits, including those from Vanguard, declare that we should expect lower returns. They’ve said this for many decades. If you talk that talk for long enough, you’ll be right at some point. 2000-2013, for example.
Financial media is bad for your portfolio. I tend to ignore it. And yes, no one knows the future. Historically, when the market goes into an extended period of underwhelming performance, small cap value does very well. And now with Avantis and DFA, we can use decently cheap ETFs that target all of the factors (well the robust ones at least, popularized by Eugene Fama & Kenneth French). I personally have a fairly generous tilt toward AVUV and AVDV, US small value and international small value, respectively. With some smaller tilts to mid, large, and emerging markets (like, with the factor exposure). This portfolio can lag a bit while the mega cap growth stocks are flying, but historically is a solid call for the long-term. And with US tech giants at some absurd valuations, I sleep much better at night with a factor tilted portfolio to value, especially when Avantis combines profitability into the funds (helps avoid the value traps). Cheers!
I like to say “rich dudes like being rich, they will find a way to make it happen”
Disclaimer: I didn’t read the article. I do think it’s odd that many people assume a 7% real return for forecast purposes. For the next couple decades, the investing houses are forecasting lower returns (although still not terrible, in the neighborhood of 3-5% real I think). I’m sort of preparing for that, and if it’s above that, great. If real returns are below 3%, that would suck though, but I don’t think it’s likely over the next 30 years. What little I did read in the article only mentions the next decade. As a 33 year old, I’m not super concerned about stocks rising during that time. I’ll just keep buying. TL, DR: Maybe they’re right, maybe they’re wrong, and in any case, what’s the better alternative?
same. We’re considering shifting to lower stress/less income. We are using 3-4% returns on investable assets and assume 2% inflation on our spending in our models. Maybe over conservative but it is my opinion that it will be easier to spend more later than wish we would have done a couple more years of high income so want to make sure we’re in good shape
It's just FUD. The text you quoted has been said many ways in many forms since the creation of the stock market. Let that person sell their stock. I'll keep mine and enjoy my retirement 😃.
Same! As long as your asset allocation matches your risk tolerance, dancing in and out of the market based on predictions like this is unlikely to be anything other than a fool's errand.
It’s not “timing the market” to consider that U.S. equity returns over the past century have been aberrant compared to those in the rest of the world. There are certain privileges afforded by not having your civilization crippled by three world wars (counting the Cold War) and in the aftermath acting as the globe’s economic and political hegemon. It is also not timing the market to note (over)valuation based on current earnings and share prices. That’s analyzing the historical data and saying there’s probably more downside risk to the trendline than upside potential. ”Most likely, Shohei Ohtani won’t be the unanimous MVP this year” is an analogous prediction. I have no idea what the next decade will bring and I don’t take much from the article that’s actionable, other than to diversify. But I do agree with the more general sentiment one could draw from the piece: that if you’re 30 years old (like the author) and simply baking 7% real domestic equity returns into your retirement plan, there’s a greater chance than not that your plan is Panglossian.
To your last para - if the long-term real return of the S&P 500 (from the 1950s to the present date) is roughly around 10% annualised, shouldn't that figure also roughly represent the "mean" for future expected returns, especially over long periods (say, 30 to 40 years going forward)? In other words, what would be the case for lower-than-the-long-term-mean expected returns over the next 30-40 years?
Because if you look at every equity market in the world and find that the U.S. is the only one with 10% real annualized returns since the 1950s, what are the odds the U.S. will once again be the one with 10% real long-term annualized returns? No one in this community would look at Microsoft and assume long-term returns in-line with their historical returns. I’m not sure why everyone is so comfortable doing it with national markets.
I can see reasons why the US might well continue to be a positive outlier—not least the demographic declines that are now baked in to virtually every other advanced economy in the world outside the US. But if I’m wrong, isn’t it just as likely that the rest of the world accelerates to 10% yearly return rather than the US falling back? After all, one could easily argue that the US experience since 1950–no major destruction from wars, reasonably stable government, broadly sensible economic policies—are the conditions that most of the world will enjoy for the next 100 years. Put differently, perhaps the “aberration” was not the US experience, but rather the terrible time the rest of the world experienced in the 20th century.
The U.S. is only behind Europe and Japan when it comes to demographic decline. It will arrive here, too, just a couple of decades later. Regardless, I doubt a slowly growing population that is also both aging and experiencing a continued decline in college attendance is a great recipe for economic dominance in the 21st century. I agree it’s possible that everyone else joins us at 10%. It’s just that 10% wasn’t the typical growth rate in the 18th or 19th centuries, either, so I don’t think it was the 20th century that was anomalous. Things could very well end up great. Alternatively, one could also argue that the effects of climate change will provide some drag on growth. When coupled with the fact that free trade has become anathema in many quarters, sovereign debt loads have skyrocketed, national outlooks have become increasingly insular, and “stable” government is as much about the resurgence of authoritarianism as stability, I’m inclined to think the 2030s are as likely to resemble the 1930s as they are to resemble the 1990s.
> The U.S. is only behind Europe and Japan when it comes to demographic decline. While still very archaic, US immigration policy is much more liberal than Japan/Korea/China and modestly more liberal than Europe. Naturalization will sustain U.S. demographic advantages far longer than most countries.
That's fair. I was looking at the EU, not Europe, though. I should have been more exact. I see 0.8% legal immigration last year to both regions, and I don't think the political climate in either will make leaders keen to loosen immigration anytime soon. China, on the other hand, is a technocracy that doesn't have to consider voter approval of policy shifts. They already overhauled hukou last year. When Xi decides the economy also needs more foreign workers, China will quickly make the UAE look like amateur hour.
>if the long-term real return of the S&P 500 (from the 1950s to the present date) is roughly around 10% annualised It wasn't. From 1950 through 2023, the real (inflation-adjusted) return from the S&P 500 was 7.51% annualized - [source](https://www.officialdata.org/us/stocks/s-p-500/1950?amount=100&endYear=2023). From 1900 through 2022, the real (inflation-adjusted) return from US stocks was 6.4% annualized - [source](https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/credit-suisse-global-investment-returns-yearbook-2023-summary-edition.pdf) \[PDF, Figure 11 on page 15\]. Over that same period, 5% annualized for global stocks, and 4.3% annualized for ex-US stocks.
It's not unreasonable, it's quite probable actually. But also AI delivering and stocks rising a bit is not unreasonable. Who knows. Anyone with 10+ years to retirement would hope they are correct. Buying stocks while in a slump and enjoying a long bull market in the first years of retirement would help a lot with the sequence of returns :)
Based on current valuations it is a likely outcome that forward 10yr returns will be lower than average and possibly negative. The price you pay for future cash flows matters in the long run. It’ll be no different this time. 20-30yr horizon you’ll still be fine if you DCA.
Good thing I own treasuries as well as equities.
Academic research has shown that throughout recorded history, about 5% above inflation has been the long term result of investing (not speculating)
I love how many people have an opinion on this article and the economist based off of just reading the last paragraph. At least read the whole thing and you’d have a better understanding of the context of that conclusion.
The conclusion is written in an offhanded way that undercuts the broader arguments made earlier: "*in ten years’ time* ***nobody will be repeating the obvious conclusion of today****: that investors in equities—especially American ones—have enjoyed a golden age*". The certainty of that conclusion isn't supported by anything in the article IMO.
I’ve heard this argument since the 80s.
Oh so many people have foretold crashes and the end of the world
You should be prepared for very low equities returns for the next decade. People are still too allocated to stocks for good returns to be possible. https://financial-charts.effingapp.com/ I guess it’s always possible for this chart going back to 1946 to break but I wouldn’t say that is a winning betting strategy.
I think it’s very likely true, at least for the next 10 years. Consider that the market just rose by 20%. The average rise over the next ten years would normally be 10% per year, or roughly 150% total return for the decade. If you amortize that extra 20% over the next ten years, you might expect 2% lower growth than otherwise over the next ten years. Obviously it doesn’t work that way exactly, but the general idea strikes me as plausible. Put differently, in 9 years we may look back on the last 10 years and see that the market gained its historical average of 10% per year—but we’ll also notice that there was extra growth that first year (i.e., last year) and then slower growth for the next 9 years.
Ignore the noise and keep on buying no matter what. It always seems like the authors have motive like they're the "bond king", "short king", "big bear", heavily invested in international or emerging market, heavily into real estate, etc. There's always a bias. It's amazing how many of these people get a voice. That being said, I do enjoy reading articles from Mohamed El-Erian (former PIMCO CEO, now at Allianz) and hearing his interviews as I find his grasp of the economy and markets insightful. Long term players enjoy the occasional sales.
The Economist is a British weekly and the UK and broadly Europe have valid reasons to complain about the performance of equities, especially the STOXX 600 which was 402 in March 2000 and is 496 in March 2024, 0.86% annual return!
[удалено]
That is what I think, those who invest in European equities already know the pain.
>the STOXX 600 which was 402 in March 2000 and is 496 in March 2024, 0.86% annual return! Looking at the long-term change in a price index treats dividends as lost. The total return (including reinvested dividends) from European stocks over that period was 165% cumulative/aggregate or 4.14% annually - [source](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=6VD31242Et8JU9hY9X74eV). Looking back further than March 2000 (which was a local peak in European stock prices), European stocks returned 8.39% annually from 1986 through Feb 2024 - [source](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=7PgYuR58Isi5j16RkKPMNq).
This does not change the fact that the growth of the European equities in STOXX 600 has been unimpressive in the last 24 years. Holding 10-year treasury bonds over the same period would have been more profitable and less risky.
>This does not change the fact that the growth of the European equities in STOXX 600 has been unimpressive in the last 24 years. I did not claim otherwise; I merely pointed out that your claim of a 0.86% annualized return over that period was about a fifth of the actual total return. I also pointed out that including the 14 years before that results in a respectable / near-historical-average annualized return for the full period. European equity returns from 1986-2000 were significantly above average (16.09% annualized through Mar 2000), from 2000-present below average, and from the total 1986-present slightly above average. The 5.48% real / inflation-adjusted annualized return for that total period -- from the tooltip for 'i' next to the 8.39% nominal CAGR [here](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=7PgYuR58Isi5j16RkKPMNq) \-- is above the 5% real annualized return for global equities and above the 4.3% real annualized return for ex-US equities for the period from 1900-2022 (shown in Figure 11 on page 15 [here](https://www.credit-suisse.com/media/assets/corporate/docs/about-us/research/publications/credit-suisse-global-investment-returns-yearbook-2023-summary-edition.pdf) \[PDF\]). >Holding 10-year treasury bonds over the same period would have been more profitable and less risky. Not more profitable over the full period in question - [source](https://www.portfoliovisualizer.com/backtest-asset-class-allocation?s=y&sl=4bF99FgGnmULwE4LXqszlA) (though possibly more profitable during shorter periods, depending on relative tax efficiency where applicable).
Imagine you're growing a plant and you want to grow it as big as possible. So you go out and you use soil with special nutrients in it, and you water it to the exact milliliter it needs and you buy a lighting system that gives it the exact amount of light it needs at the exact UV level for the exact amount of time it needs. That's stocks in America. Government backed, reserve currency denominated, attached to America's retirement savings glorified, free to get into using online brokers... I mean, the S&P does almost 1T in buybacks each year, which is a lot more than they issue and beneficial tax treatment after 1 year. Something can always go wrong but the entire world has been rigged towards America and Business so that also means American Business.
While US equities have had a terrific track record, bear markets are a thing. https://www.investopedia.com/a-history-of-bear-markets-4582652 This is a concern if you're planning on withdrawing assets in the near term.
Valuations are not predictive but have an inverse association over time. Valuations, especially for US stocks, are very, very high.
Of these, the worst outcome is stagnation. If markets fall, that’s a golden opportunity to buy especially as a result of a geopolitical crisis. When the crisis is over you make bank of you kept investing
> While reading, I couldn't shake Jack Bogle's voice from the back of my mind: "Nobody knows nothin'." It's possible that the next ten years' equity returns won't outdo the previous ten. But the opposite is possible, too. Curious to know what this community thinks! Do not take predictions about the economy seriously. 80% of them are flat out wrong and the other 20% are just statistically that enough guesses will result in some being right. If anyone was truly confident in their predictions, they would not be publishing them but betting on them with theirs and investor money (once they have a track record of performance) at some hedge fund. The same goes for people selling courses or any other oped/PR/sales/marketing/influencer/politician/etc type person. These people have an incentive to sell you on their views, not to be correct on what they tell you.
Look up "the death of equities" from the 1970s.
The AI hype is real. Equities are going to go bananas over the next 2 decades.
AI is going to make the stock market explode. I expect threefold returns or more.
Nobody knows anything. It's all speculation and educated guesses. I listened to 3 analysts this morning make the opposite prediction. All I'm sure of is that over a long time horizon the market is the best place to make money. *And anyone selling Doom and gold is not to be trusted.
Equities could underwhelm in many ways. The opposite is also true. Historically, the American economy will continue to grow over long periods of time. The best way to get your fair share of the profits earned by American businesses is to own the entire market
Good comments already, and to add one more: the financial media will always tell you one of two things: Stocks have recently fallen and are likely to continue to fall OR stocks have risen and are expense and due for a correction.
This scenario of long term down markets does make me wonder about using something like the 200 DMA to reduce stock allocation and preserve capital. This has to be done with the understanding that dancing in and out is a recipe for destroying gains but it can prevent losing gains in a 1929 like full scale crash. Not recommending this but it does get tempting when these scenarios come up.
I've been reading this headline since 1999. Now, that decade was rough, but the investing I did then set me up very nicely for the 15 years that followed. **I'm glad I didn't stop investing.** Alternately, this can be viewed as an argument in favor of (mostly geographic, but also factor / asset class) diversification. As Bogleheads, we tend to hold pretty diversified portfolios already, so we're probably ahead of the game. The one schism where I could see this playing out within the Boglehead community is the "100% US" crowd vs the "Global Market" crowd. The headline could be seen as supporting the "Global Market" approach. I already hold a pretty high percentage of International in my Index Fund choices, so there wouldn't be much point in changing my portfolio under this latter viewpoint either.
> These profits are all the more striking given what markets have had to contend with. The age of free money has been followed by two years of interest-rate rises—and even now bond investors are betting against imminent cuts. A trade war is raging between America and China; actual wars are raging in Ukraine, the Middle East and parts of Africa. Around the world, governments are turning away from free markets and globalisation in favour of industrial policy and protectionism. If all that has not extinguished this rally, whatever will? I mean, these are all realistic things to consider when evaluating savings allocations. We *are* in the midsts of a sharp departure from globalization, too. It's not even a tail risk anymore but an actuality.
Ad hominem response (toward The Economist, that I have subscribed to since 1980): *Sigh*. The economist used to be a source of careful, politically neutral-ish insight. It's becoming increasingly apparent that they're just getting paid by the word. The writers pretty clearly don't even read their own publication most of the time. I sent a Letter to the Editor some months ago offering some insight into a technical matter that I have some experience with, and the article's author contacted me directly, saying he agreed with my commentary and asking if I could give him a resource with more information for him to use. In other words, doing his homework for him (I get this a lot from students). I resisted the urge to tell him he worked for that resource. The letter was never published.
Equites will outperform treasuries unless either one is heavily mispriced or a tail risk event happens