Future Market Expectations
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Future Market Expectations
There seems to be a lot of differing opinions out there about the market right now, so I want to see what the Boglehead community thinks. What are your guys expected returns for say an S&P 500 Index fund for the next 1-, 3-, 5-, and 10- year periods? Do you believe that despite just coming out of the covid-19 "recession", there could be another serious market decline in the near future. And with the government injecting money into the economy and the fed keeping rates low, what's your guys' take on the future regarding inflation? I hear so many different opinions, so I'll be interested in seeing what people say from this community.
- sunnywindy
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Re: Future Market Expectations
We'd also like to hear your opinion, as I'm sure you have one.
Me - I just stay invested in low-cost market-cap ETFs and let them do all the work of reacting to what comes next.
Me - I just stay invested in low-cost market-cap ETFs and let them do all the work of reacting to what comes next.
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Re: Future Market Expectations
There definitely could. All we need is an event to cause it. There is always risk investingBigSteve79 wrote: ↑Fri Apr 16, 2021 7:34 am Do you believe that despite just coming out of the covid-19 "recession", there could be another serious market decline in the near future.
Re: Future Market Expectations
I expect low returns in the next 10 years. 4% real is my best guess (and this is including 50% international). My best guess isn't worth a dime though. Technology and culture are changing so fast anything could happen.
Re: Future Market Expectations
I expect positive returns every year. Sometimes I'm right, sometimes I'm not.BigSteve79 wrote: ↑Fri Apr 16, 2021 7:34 am There seems to be a lot of differing opinions out there about the market right now, so I want to see what the Boglehead community thinks. What are your guys expected returns for say an S&P 500 Index fund for the next 1-, 3-, 5-, and 10- year periods?
There could always be another serious market decline in the near future. It's a truism, unrelated to anything that happened in the past.Do you believe that despite just coming out of the covid-19 "recession", there could be another serious market decline in the near future.
There will be inflation in the future.And with the government injecting money into the economy and the fed keeping rates low, what's your guys' take on the future regarding inflation?
You will hear many different opinions here, the same as elsewhere. Nobody can predict the future. Most people don't bother trying.I hear so many different opinions, so I'll be interested in seeing what people say from this community.
This isn't just my wallet. It's an organizer, a memory and an old friend.
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Re: Future Market Expectations
I took pain to rebalance to bonds two days ago, which spoke out my market expectations.
Re: Future Market Expectations
I have no expectations in the short term.BigSteve79 wrote: ↑Fri Apr 16, 2021 7:34 am There seems to be a lot of differing opinions out there about the market right now, so I want to see what the Boglehead community thinks. What are your guys expected returns for say an S&P 500 Index fund for the next 1-, 3-, 5-, and 10- year periods? Do you believe that despite just coming out of the covid-19 "recession", there could be another serious market decline in the near future. And with the government injecting money into the economy and the fed keeping rates low, what's your guys' take on the future regarding inflation? I hear so many different opinions, so I'll be interested in seeing what people say from this community.
For *planning purposes* (not a prediction), for the next 10 years, I'm modeling:
Inflation: 2.3%
Median Return of 60/40: 4.6%
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Future Market Expectations
For the next 1, 3, & 5 years, I expect almost anything can happen, so I don't generate expected returns over that short a period, there's too much uncertainty. Over the next decade, it's seems reasonable to expect single digits returns (0-9%) on most assets, with foreign and value stocks possible offering returns on the higher end of that range, and US and growth stocks on the lower end of that range. That's as detailed as I get. I find it laughable when people estimate returns to a decimal point, as the confidence intervals around those estimates are so great it's likely their estimates will not be within a few decimal places, and in many cases will probably be off several percent.
I also don't worry about future declines because I have no control over that. All you can do to counter that somewhat is to rebalance out of stocks when they are doing well (as they have the past year) into bonds and/or cash.
I don't even venture to guess what the next decade holds for inflation. All I know is that, if you do fear inflation, your best bets are to make sure you are internationally diversified, tilt to value stocks, and own some equities of commodities producers. And on the fixed income side, some TIPS, I-bonds, and short term Treasuries are a good idea.
These are all general guidelines but I think that's about the best you can do.
I also don't worry about future declines because I have no control over that. All you can do to counter that somewhat is to rebalance out of stocks when they are doing well (as they have the past year) into bonds and/or cash.
I don't even venture to guess what the next decade holds for inflation. All I know is that, if you do fear inflation, your best bets are to make sure you are internationally diversified, tilt to value stocks, and own some equities of commodities producers. And on the fixed income side, some TIPS, I-bonds, and short term Treasuries are a good idea.
These are all general guidelines but I think that's about the best you can do.
Last edited by asif408 on Fri Apr 16, 2021 9:57 am, edited 1 time in total.
Re: Future Market Expectations
That is always the case.BigSteve79 wrote: ↑Fri Apr 16, 2021 7:34 am There seems to be a lot of differing opinions out there about the market right now
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Re: Future Market Expectations
If you want investment advice based on predictions, I offer you the investment and allocation views of:
BlackRock
link
J.P. Morgan
link
The trouble is, predictions are very unreliable. I think overweighting or underweighting assets classes based on predictions runs contrary to much of the "no one knows nothing" spirit around here. There's a lot of, "ignore predictions, ignore the noise" sentiment in these parts.
Edit: Oh, almost forgot, BlackRock capital market assumptions
link
BlackRock
link
J.P. Morgan
link
The trouble is, predictions are very unreliable. I think overweighting or underweighting assets classes based on predictions runs contrary to much of the "no one knows nothing" spirit around here. There's a lot of, "ignore predictions, ignore the noise" sentiment in these parts.
Edit: Oh, almost forgot, BlackRock capital market assumptions
link
Last edited by Robot Monster on Fri Apr 16, 2021 10:20 am, edited 2 times in total.
- Portfolio7
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Re: Future Market Expectations
* Heh. I expect the markets will vary.
* A lot of people expect lower than average returns for the next 10-15 years. I don't. I don't believe the data we use to make such guesses is as prescriptive as all that. I can also handle being incorrect, if I turn out to be wrong.
* We will have inflation. We will also continue to have strong disinflationary trends. Flip a coin as to which one wins in the long run.
Trying to predict the future is a lot of fun, but acting on it is dangerous for your wealth. I think it's far more valuable to have a diversified portfolio with which you can weather every storm. It's not always easy to determine what that AA looks like either, it will be different from person to person depending on your age, risk tolerance, job security, pension or lack thereof, all that stuff.
* A lot of people expect lower than average returns for the next 10-15 years. I don't. I don't believe the data we use to make such guesses is as prescriptive as all that. I can also handle being incorrect, if I turn out to be wrong.
* We will have inflation. We will also continue to have strong disinflationary trends. Flip a coin as to which one wins in the long run.
Trying to predict the future is a lot of fun, but acting on it is dangerous for your wealth. I think it's far more valuable to have a diversified portfolio with which you can weather every storm. It's not always easy to determine what that AA looks like either, it will be different from person to person depending on your age, risk tolerance, job security, pension or lack thereof, all that stuff.
"An investment in knowledge pays the best interest" - Benjamin Franklin
Re: Future Market Expectations
I don't know, but I will venture that it won't be as good at the last ten years. If we enter an era of gradually rising interest rates, I think there's a good chance that the stock market will go nowhere. There was a fascinating article by Buffett about the 17-year cycle prior to the 1980s where rising interest rates resulted in very poor stock market returns.
Re: Future Market Expectations
Just a guess, but good returns for the next few years with all the money being pumped into the system, then muted returns thereafter. Hopefully we don't have some kind of lost decade or something
Re: Future Market Expectations
This article lists a few predictions https://www.morningstar.com/articles/10 ... 21-edition
Re: Future Market Expectations
I find this period of financial history quite fascinating because you can see the rise (and clash) of two competing narratives about the future of the stock market.
On one side: you have the story that valuations across the board are extremely expensive, using metrics like P/E ratios, CAPE, or the "Buffett Indicator," signs that there is exuberance in the market (Gamestop, Bitcoin, Tesla, etc.), the sense that low interest rates have pushed investors into taking on equity risk everywhere.
On the other side: you have an economy that seems primed to come out of the Covid lockdowns, with everyone doing all the things they couldn't do before, spending on restaurants, retail, flights; so all the doomsday scenarios and chargeoffs for bank stocks or airlines and so on did not materialize.
I'm glad I don't invest based on macro narratives because this would surely be a confusing time. Personally, I think stock market valuations are extremely expensive, but I don't see how a crash could occur if the economy is poised to do very well and consumers are ready to open their wallets in a very real way. (Are there crashes that have occurred while business and economic fundamentals have been great?)
On one side: you have the story that valuations across the board are extremely expensive, using metrics like P/E ratios, CAPE, or the "Buffett Indicator," signs that there is exuberance in the market (Gamestop, Bitcoin, Tesla, etc.), the sense that low interest rates have pushed investors into taking on equity risk everywhere.
On the other side: you have an economy that seems primed to come out of the Covid lockdowns, with everyone doing all the things they couldn't do before, spending on restaurants, retail, flights; so all the doomsday scenarios and chargeoffs for bank stocks or airlines and so on did not materialize.
I'm glad I don't invest based on macro narratives because this would surely be a confusing time. Personally, I think stock market valuations are extremely expensive, but I don't see how a crash could occur if the economy is poised to do very well and consumers are ready to open their wallets in a very real way. (Are there crashes that have occurred while business and economic fundamentals have been great?)
Re: Future Market Expectations
They can both be true at the same time.Caduceus wrote: ↑Fri Apr 16, 2021 10:32 am I find this period of financial history quite fascinating because you can see the rise (and clash) of two competing narratives about the future of the stock market.
On one side: you have the story that valuations across the board are extremely expensive, using metrics like P/E ratios, CAPE, or the "Buffett Indicator," signs that there is exuberance in the market (Gamestop, Bitcoin, Tesla, etc.), the sense that low interest rates have pushed investors into taking on equity risk everywhere.
On the other side: you have an economy that seems primed to come out of the Covid lockdowns, with everyone doing all the things they couldn't do before, spending on restaurants, retail, flights; so all the doomsday scenarios and chargeoffs for bank stocks or airlines and so on did not materialize.
If I'm an athlete, I can take PE drugs and really genuinely improve my performance. But I'm also genuinely on drugs, too.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Future Market Expectations
Lots of people said the same thing after 2008-09.
Meet my pet, Peeve, who loves to convert non-acronyms into acronyms: FED, ROTH, CASH, IVY, ...
Re: Future Market Expectations
They also said it after 2000 and were right.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Future Market Expectations
From a results perspective, I don't think they can both be true. If the first camp is right, it will take a serious re-valuation - either a sudden significant crash or consecutive years of negative performance - for things to get back to traditional fair valuation.watchnerd wrote: ↑Fri Apr 16, 2021 10:36 amThey can both be true at the same time.Caduceus wrote: ↑Fri Apr 16, 2021 10:32 am I find this period of financial history quite fascinating because you can see the rise (and clash) of two competing narratives about the future of the stock market.
On one side: you have the story that valuations across the board are extremely expensive, using metrics like P/E ratios, CAPE, or the "Buffett Indicator," signs that there is exuberance in the market (Gamestop, Bitcoin, Tesla, etc.), the sense that low interest rates have pushed investors into taking on equity risk everywhere.
On the other side: you have an economy that seems primed to come out of the Covid lockdowns, with everyone doing all the things they couldn't do before, spending on restaurants, retail, flights; so all the doomsday scenarios and chargeoffs for bank stocks or airlines and so on did not materialize.
If I'm an athlete, I can take PE drugs and really genuinely improve my performance. But I'm also genuinely on drugs, too.
I have a significant allocation to cash now (about 27.7%) and I can tell you I'm hating every second of the bull market, even though rationally, I know I should be happy my portfolio is increasing like it's on steroids since 72% of it is still in stocks. But since I don't intend to sell my stocks, and I'm not yet fully invested at the prices I want, I would rather have a crash in the near future.
Re: Future Market Expectations
Sure they can both be right.Caduceus wrote: ↑Fri Apr 16, 2021 10:46 am
From a results perspective, I don't think they can both be true. If the first camp is right, it will take a serious re-valuation - either a sudden significant crash or consecutive years of negative performance - for things to get back to traditional fair valuation.
It's just a matter of sequencing and short- vs long-term perspective.
You get a big run up in stock returns for a few years with nutso valuations due to momentum.
Then a low-return era following with valuation contraction, either suddenly or through sideways action over many years.
And a possible re-favoring of international with its lower valuations and higher dividends.
We've seen this movie before.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Future Market Expectations
A couple of things to keep in mind here. 1st, I think you are focused on US economy when you say "an economy". Not sure that is true in all corners -- US or world wide. & will the 'new normal' be similar to the old. History can be a tricky guide. Once upon a time, companies (& supply chains) weren't as multinational, productivity lower, etc. Also, stock market looks ahead & tries to anticipate. At some point, an overstimulated, post pandemic economy may not be the "other" side but a cause for increased inflation/interest rates.Caduceus wrote: ↑Fri Apr 16, 2021 10:32 am
On the other side: you have an economy that seems primed to come out of the Covid lockdowns, with everyone doing all the things they couldn't do before, spending on restaurants, retail, flights; so all the doomsday scenarios and chargeoffs for bank stocks or airlines and so on did not materialize.
Re: Future Market Expectations
I think we will match the 1982 - 2000 run meaning about doubling over the next 3-5 years followed by a crash and doldrums of 10-15 years. I also don't think my prediction is worth all that much : /
70% Global Stocks / 30% Bonds
Re: Future Market Expectations
I don't see any real conflict between the two narratives...the underlying economy is about to break out and spend a ton of money from pent up demand...so companies are being valued significantly higher than the recent earnings indicate they are worth. It doesn't take poor stock performance to correct valuations, it takes great earnings growth, supplied by the second narrative. In this view future stock returns would be pumped by the increased spending, and dampened by current valuations... and end up average.Caduceus wrote: ↑Fri Apr 16, 2021 10:46 amFrom a results perspective, I don't think they can both be true. If the first camp is right, it will take a serious re-valuation - either a sudden significant crash or consecutive years of negative performance - for things to get back to traditional fair valuation.watchnerd wrote: ↑Fri Apr 16, 2021 10:36 amThey can both be true at the same time.Caduceus wrote: ↑Fri Apr 16, 2021 10:32 am I find this period of financial history quite fascinating because you can see the rise (and clash) of two competing narratives about the future of the stock market.
On one side: you have the story that valuations across the board are extremely expensive, using metrics like P/E ratios, CAPE, or the "Buffett Indicator," signs that there is exuberance in the market (Gamestop, Bitcoin, Tesla, etc.), the sense that low interest rates have pushed investors into taking on equity risk everywhere.
On the other side: you have an economy that seems primed to come out of the Covid lockdowns, with everyone doing all the things they couldn't do before, spending on restaurants, retail, flights; so all the doomsday scenarios and chargeoffs for bank stocks or airlines and so on did not materialize.
If I'm an athlete, I can take PE drugs and really genuinely improve my performance. But I'm also genuinely on drugs, too.
I have a significant allocation to cash now (about 27.7%) and I can tell you I'm hating every second of the bull market, even though rationally, I know I should be happy my portfolio is increasing like it's on steroids since 72% of it is still in stocks. But since I don't intend to sell my stocks, and I'm not yet fully invested at the prices I want, I would rather have a crash in the near future.
My personal view is that things are starting to feel frothy in a way that reminds me of 2006-2007. I just remember looking around then and thinking "I I can't keep up with what's going on, and I'm better off than most...this just can't last". I'm getting the same "this can't last" feeling, though for different reasons. So my prediction, there will be a big correction in the next few year, probably at least a year from now. Returns between now and then will be rich. Long term I expect average...about 10% nominal on stocks, and about 2% inflation. What am I doing about it? Nothing, keeping my head down and plowing money into the market.
Re: Future Market Expectations
I expect up, down or sideways.
What do I win?
What do I win?
Re: Future Market Expectations
Therefore it is safe to assume that no one knows anything
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Re: Future Market Expectations
what is interesting now is that everyone is expecting muted returns for the next 10 years BUT I heard on the Paul Merriman podcast, he was mentioning that they had done a survey prior to the 2000 crash and the vast majority of people in that time thought the next 10 years would continue with 15-20% annual returns that were the norm of the late 90s.
The sentiment is definitely different now than prior to the last lost decade.
The sentiment is definitely different now than prior to the last lost decade.
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Re: Future Market Expectations
I echo this view as well, of course, pure speculation. I don't think a market crash at this exact point is imminent as it does not feel euphoric enough compared to the frenzy of 1999 or 2007 (housing). Lots of cash on the sidelines and still too much pessimism... we need a lot more euphoria for a blow off top.
Re: Future Market Expectations
There will most definitely be some kind of "crash" when the government stops throwing pallets of money out of helicopters. Either that or the inflation will get so high that it forces a lot of industries to slow down. It's always been temporary so far.
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Re: Future Market Expectations
I’m far from an expert, and been contemplating real hard on switching some equities to bond. Maybe 25-30% as I’m all equities currently. I just have a feeling that we’ve somewhat flat lined from Covid and with Entergy companies, and retails and such getting close to turning back to positive earnings I’m still thinking we can see 1 more year or so of big growth.
There’s a lot of money that’s been handed out and then getting passed on to business as we as Americans have huge cases of the “wants”
There’s a lot of money that’s been handed out and then getting passed on to business as we as Americans have huge cases of the “wants”
Re: Future Market Expectations
Or an international military conflict could arise somewhere. China is flexing its muscles in Asia. The Middle East remains unstable. Russia is always willing to stir up trouble. And Kim in North Korea hasn’t been heard from recently.
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Re: Future Market Expectations
I intentionally don't have an opinion about these topics. My IPS says to ignore all those opinions and to stay the course in low-cost, broad-market mutual funds.BigSteve79 wrote: ↑Fri Apr 16, 2021 7:34 am There seems to be a lot of differing opinions out there about the market right now, so I want to see what the Boglehead community thinks. What are your guys expected returns for say an S&P 500 Index fund for the next 1-, 3-, 5-, and 10- year periods? Do you believe that despite just coming out of the covid-19 "recession", there could be another serious market decline in the near future. And with the government injecting money into the economy and the fed keeping rates low, what's your guys' take on the future regarding inflation? I hear so many different opinions, so I'll be interested in seeing what people say from this community.
Re: Future Market Expectations
Or Bitcoin implodes
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
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Re: Future Market Expectations
I'm only going to tackle the 10 year view because anything shorter than that is a fool's errand.
I think US equities are expensive on a a few measures like CAPE and the Buffett Indicator, both on a historical basis and when you compare it to international markets. A lot of that is interest rates, but there's also some impact from stimulus + high savings rates due to lockdowns + lots of bored retail investors day trading. The latter things will fall-off whenever COVID ends. Low interest rates will probably be around for years, and if the Fed ever increases them (as it intends to do) that should be a headwind to returns sometime in the next decade. Long story short, we'll probably still have positive annualized returns, but they may be low to mid single digit instead of the mid to high most people expect out of equities.
I think US equities are expensive on a a few measures like CAPE and the Buffett Indicator, both on a historical basis and when you compare it to international markets. A lot of that is interest rates, but there's also some impact from stimulus + high savings rates due to lockdowns + lots of bored retail investors day trading. The latter things will fall-off whenever COVID ends. Low interest rates will probably be around for years, and if the Fed ever increases them (as it intends to do) that should be a headwind to returns sometime in the next decade. Long story short, we'll probably still have positive annualized returns, but they may be low to mid single digit instead of the mid to high most people expect out of equities.
Re: Future Market Expectations
Perish the thought old boy!watchnerd wrote: ↑Fri Apr 16, 2021 9:45 pmOr Bitcoin implodes