30 Year Stocks Forecast

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lp613
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30 Year Stocks Forecast

Post by lp613 »

Please let me know if this topic already exists.

I was wondering if there were a few good sources to find a 30 year forecast for US and non US Stocks.

I am invested 100% in stocks - 75% US (VTI) 25% Foreign (VXUS), though my net worth is not very high (about $250K, which $170K is equity in my house, $60K in IRAs & 529 and $20K cash, and plan to fully fund Roth IRAs every year). I am in early 30s and I have around 35 years to retirement. I am not a high earner, but my job is steady. Point is, that based on my understanding of Boglehead philosophy (I read The Bogleheads' Guide to Investing), and using the Vanguard Investor Questionnaire, given my personal situation, I can take a lot of risk (i.e. 100% stocks at this point in my life), and Ill have big chance I will come out ahead, perhaps with 7%-8% growth a year, on average.

However, given the current weak forecasts (that experts think that the strong historical growth in US stocks in the last 30 years are not going to be repeated the coming 30 years), I am concerned that this "set it, & forget it" approach wont really work.

Even in that book, it quotes from an expert at Portfolio Solutions that US Large Cap will grow at 7.5% before a 2% inflation over next 30 years. Is that still current? Where can I see that updated every year? Where can I see multiple opinions?
mega317
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Re: 30 Year Stocks Forecast

Post by mega317 »

Sure you can find forecasts anywhere and everywhere. Figuring out which ones will be correct is the hard part :wink:

There is very clear evidence that NO ONE, not little investors not professionals, can reliably time the stock market. So your choices are set it and forget it and accept what the stock market gives you, attempt market timing with most likely disastrous results, or avoid stocks and understand you'll probably have to work your whole life.
Tamalak
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Re: 30 Year Stocks Forecast

Post by Tamalak »

Based on rolling P/E my forecast is 5.7% real annualized for a world-cap portfolio.
Last edited by Tamalak on Fri May 20, 2022 12:26 pm, edited 1 time in total.
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jakehefty17
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Re: 30 Year Stocks Forecast

Post by jakehefty17 »

lp613 wrote: Fri May 20, 2022 11:30 am Please let me know if this topic already exists.

I was wondering if there were a few good sources to find a 30 year forecast for US and non US Stocks.

I am invested 100% in stocks - 75% US (VTI) 25% Foreign (VXUS), though my net worth is not very high (about $250K, which $170K is equity in my house, $60K in IRAs & 529 and $20K cash, and plan to fully fund Roth IRAs every year). I am in early 30s and I have around 35 years to retirement. I am not a high earner, but my job is steady. Point is, that based on my understanding of Boglehead philosophy (I read The Bogleheads' Guide to Investing), and using the Vanguard Investor Questionnaire, given my personal situation, I can take a lot of risk (i.e. 100% stocks at this point in my life), and Ill have big chance I will come out ahead, perhaps with 7%-8% growth a year, on average.

However, given the current weak forecasts (that experts think that the strong historical growth in US stocks in the last 30 years are not going to be repeated the coming 30 years), I am concerned that this "set it, & forget it" approach wont really work.

Even in that book, it quotes from an expert at Portfolio Solutions that US Large Cap will grow at 7.5% before a 2% inflation over next 30 years. Is that still current? Where can I see that updated every year? Where can I see multiple opinions?
Let me check my crystal ball... in the next 30 years... stocks will go up!

Feel better?

...

Sure the US market has been amazing the last 30 years. Doesn't mean that it can't continue to do so. Over your estimated 35 year time horizon, do you really think current market forecasts are worth anything at all? I don't. There's my opinion.

You can go to any website and some random expert/nobody/celebrity/influencer/grandpa will make predictions about where the market is heading. They could be right but they're probably wrong... and you really shouldn't care either way.

Nobody knows nothin. Stay the course.
"The problem with the world is that the intelligent people are full of doubts, while the stupid ones are full of confidence." -Charles Bukowski
alex_686
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Re: 30 Year Stocks Forecast

Post by alex_686 »

CAPE10 does a reasonable job if doing 10 year forecast. It is a often debated topic here but I like it for what it is - a very simple model that uses no propitiate information and give actionable information. Yes, it has wide error bars.

There are other modes out there. But 10 years tends to be the maximum. The further you go out the error bars and uncertainty increases.

10 years tends to be the sweet spot. Long enough to ignore short term noise, short enough that your error bars are reasonable.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

alex_686 wrote: Fri May 20, 2022 11:52 am CAPE10 does a reasonable job if doing 10 year forecast. It is a often debated topic here but I like it for what it is - a very simple model that uses no propitiate information and give actionable information. Yes, it has wide error bars.

There are other modes out there. But 10 years tends to be the maximum. The further you go out the error bars and uncertainty increases.

10 years tends to be the sweet spot. Long enough to ignore short term noise, short enough that your error bars are reasonable.
I guess the question for me then is how should you act when you have 30 years on your hand?
59Gibson
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Re: 30 Year Stocks Forecast

Post by 59Gibson »

OP, Why do you say you're 100% stocks (2x)??. You must know you're not even close to 100%. Strange post.
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burritoLover
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Re: 30 Year Stocks Forecast

Post by burritoLover »

Forecasts are useless for constructing a portfolio. That includes using CAPE10.

How should you construct a portfolio? Start with a global market cap weight total stock portfolio and add total bond based on your likelihood of panic selling and then add bonds closer to retirement to reduce sequence of returns risk. You can consider adding additional assets as a means of diversification that might include TIPS, small-cap value, gold, etc - whether those do you any good over the next 30 years - no one knows.
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

59Gibson wrote: Fri May 20, 2022 12:11 pm OP, Why do you say you're 100% stocks (2x)??. You must know you're not even close to 100%. Strange post.

Bc of how much of my net worth is in my house? If that's the why you're saying that, I get what you mean. Obviously though I'm only focused on my investments.

But if you're saying that for a different reason, than please explain. Bc I'm saying that since all my investments (and my plan - as of now - for my future investments, probably till I'm about 45) will be 75% VTI (US stocks) and 25% VXUS (Foreign stocks) = 100% stocks.

So why do you say that?
59Gibson
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Re: 30 Year Stocks Forecast

Post by 59Gibson »

lp613 wrote: Fri May 20, 2022 12:17 pm
59Gibson wrote: Fri May 20, 2022 12:11 pm OP, Why do you say you're 100% stocks (2x)??. You must know you're not even close to 100%. Strange post.

Bc of how much of my net worth is in my house? If that's the why you're saying that, I get what you mean. Obviusly though Im only focused on my investments.

But if you're saying that for a different reason, than please explain. Bc I'm saying that since all my investments (and my plan - as of now - for my future investments, probably till I'm about 45) will be 75% VTI (US stocks) and 25% VXUS (Foreign stocks) = 100% stocks.

So why do you say that?
Nothing to do with house.
You have 60k in stocks, 20k cash. Not 100%, its 75%
Unless you're planning on dumping the 20k in the mkt today?
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vineviz
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Re: 30 Year Stocks Forecast

Post by vineviz »

lp613 wrote: Fri May 20, 2022 12:17 pm
So why do you say that?
My guess is that it's related to this detail in your OP: "$60K in IRAs & 529 and $20K cash".

Many people would describe that as 75/25, because the cash "counts" as part of your financial portfolio.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

Its my cash reserves.
But main focus here is my IRAs 529, as over time I hope it'll dwarf my reserves, all based on saving and AA.
I guess you're saying I need to be more accurate in my communication... Ill try to remember :sharebeer
harvestbook
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Re: 30 Year Stocks Forecast

Post by harvestbook »

Even if you had a general idea (a forecast you believed), what would you do differently? I still see stocks as the best game in town for somebody like me. All I have to do is nothing, which I am very very good at. If stocks tank for 30 years, I'll have bigger problems than my stock portfolio.
I'm not smart enough to know, and I can't afford to guess.
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

harvestbook wrote: Fri May 20, 2022 12:26 pm Even if you had a general idea (a forecast you believed), what would you do differently? I still see stocks as the best game in town for somebody like me. All I have to do is nothing, which I am very very good at. If stocks tank for 30 years, I'll have bigger problems than my stock portfolio.
This is the kind of emotional support I'm looking for... #InvestmentTherapy
:D
asif408
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Re: 30 Year Stocks Forecast

Post by asif408 »

lp613 wrote: Fri May 20, 2022 12:03 pm
alex_686 wrote: Fri May 20, 2022 11:52 am CAPE10 does a reasonable job if doing 10 year forecast. It is a often debated topic here but I like it for what it is - a very simple model that uses no propitiate information and give actionable information. Yes, it has wide error bars.

There are other modes out there. But 10 years tends to be the maximum. The further you go out the error bars and uncertainty increases.

10 years tends to be the sweet spot. Long enough to ignore short term noise, short enough that your error bars are reasonable.
I guess the question for me then is how should you act when you have 30 years on your hand?
A couple of ideas:

1) Just set an allocation and stick with it (as you currently have)

2) If you believe valuations matter and can be used as alex_686 described and understand the uncertainty in them, foreign stocks and value stocks (particularly that combination) have much lower valuations. You could overweight these areas. If you were concerned about overweighting foreign too much you could also overweight US value.

I use approach #2 (I'm 90% foreign value), most here seem to prefer #1. You have to figure out what you can stick with through good and bad. If you are prone to performance chase, I'd go with approach #1. If you don't mind looking different and can deal with periodic underperformance vs certain benchmarks like the S&P then #2 might be the way to go. I prefer approach #2 because if these outperform over the next 10-15 years that would allow me to possibly take less risk in the last 15-20 years of my investment time frame. If I'm wrong I'll have to work longer, save more, or take more risk later. I prefer to take more risk now than when I'm 50 or 60.
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Re: 30 Year Stocks Forecast

Post by vineviz »

lp613 wrote: Fri May 20, 2022 12:23 pm Its my cash reserves.
But main focus here is my IRAs 529, as over time I hope it'll dwarf my reserves, all based on this philosophy.
Right.

To answer your original question, a reasonable method for estimating the long-term expected return of stocks is to add an equity risk premium of 4% or 5% to the current yield of long-term US Treasury bonds.

With long-term Treasuries yielding about 3%, I'd say that using a stock return estimate of 7% to 8% would be about as good as you can do. There's obviously a ton of uncertainty around that, but you've got to start somewhere.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: 30 Year Stocks Forecast

Post by HootingSloth »

I believe, with a relatively high degree of confidence, that the annual real return on global stocks, with dividends reinvested, over the next 30 year period, will fall within the range between -10% and +15%. I am even more confident that the cumulative return will be no worse than -100%. Beyond that, not too sure.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

vineviz wrote: Fri May 20, 2022 12:30 pm
Right.

To answer your original question, a reasonable method for estimating the long-term expected return of stocks is to add an equity risk premium of 4% or 5% to the current yield of long-term US Treasury bonds.

With long-term Treasuries yielding about 3%, I'd say that using a stock return estimate of 7% to 8% would be about as good as you can do. There's obviously a ton of uncertainty around that, but you've got to start somewhere.
Thanks.
Where does 4-5% premium come from?
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

asif408 wrote: Fri May 20, 2022 12:30 pm
I use approach #2 (I'm 90% foreign value), most here seem to prefer #1. You have to figure out what you can stick with through good and bad. If you are prone to performance chase, I'd go with approach #1. If you don't mind looking different and can deal with periodic underperformance vs certain benchmarks like the S&P then #2 might be the way to go. I prefer approach #2 because if these outperform over the next 10-15 years that would allow me to possibly take less risk in the last 15-20 years of my investment time frame. If I'm wrong I'll have to work longer, save more, or take more risk later. I prefer to take more risk now than when I'm 50 or 60.
But that's what I don't get. There seems to be two camps: Those who understand that stocks ALWAYS go up - when you give it enough time, and those who have NO IDEA about investing. Based on that, ANYONE who has 30+ (or even 15+ years!) should be 100% stocks!

Why are there any other options?
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

HootingSloth wrote: Fri May 20, 2022 12:32 pm I believe, with a relatively high degree of confidence, that the annual real return on global stocks, with dividends reinvested, over the next 30 year period, will fall within the range between -10% and +15%. I am even more confident that the cumulative return will be no worse than -100%. Beyond that, not too sure.
Brilliant. Well, better get back to my apple polishing.
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Re: 30 Year Stocks Forecast

Post by asif408 »

lp613 wrote: Fri May 20, 2022 12:37 pm
asif408 wrote: Fri May 20, 2022 12:30 pm
I use approach #2 (I'm 90% foreign value), most here seem to prefer #1. You have to figure out what you can stick with through good and bad. If you are prone to performance chase, I'd go with approach #1. If you don't mind looking different and can deal with periodic underperformance vs certain benchmarks like the S&P then #2 might be the way to go. I prefer approach #2 because if these outperform over the next 10-15 years that would allow me to possibly take less risk in the last 15-20 years of my investment time frame. If I'm wrong I'll have to work longer, save more, or take more risk later. I prefer to take more risk now than when I'm 50 or 60.
But that's what I don't get. There seems to be two camps: Those who understand that stocks ALWAYS go up - when you give it enough time, and those who have NO IDEA about investing. Based on that, ANYONE who has 30+ (or even 15+ years!) should be 100% stocks!

Why are there any other options?
I think the biggest thing is that most people are risk averse and emotionally can't handle the large short term period drawdowns in a 100% stock allocation. That's generally where bonds and cash do help, at the cost of a lower long term return. There are also large periods of time where bonds beat stocks (I believe there have been periods as long as 30 years in the US, and probably more in other countries where this has been the case), so the 100% stock allocation is no guarantee of success. This is especially true if your stock investments are concentrated in one country (e.g., think Japan 1989 to now, Russian stocks a few months ago going to 0, etc.), and much less so if you are globally diversified.

However, the greatest challenges most people have with investing are emotional.
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Re: 30 Year Stocks Forecast

Post by abc132 »

At your age, with regular additions, and with your time horizon, you could easily capture 2-4% per year over whatever the market earns over the next 10 years. That is the reason to consider a high amount of stocks. People your age choose lower stock AA's because they still succeed with additions over time and because they feel better about less volatility.

Poor stock performance over the next 10 years is one of the best outcomes for an early accumulator, assuming they can continue to invest.
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Re: 30 Year Stocks Forecast

Post by mega317 »

abc132 wrote: Fri May 20, 2022 12:45 pm you could easily capture 2-4% per year over whatever the market earns over the next 10 years.
How would this be done?
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Re: 30 Year Stocks Forecast

Post by HootingSloth »

lp613 wrote: Fri May 20, 2022 12:39 pm
HootingSloth wrote: Fri May 20, 2022 12:32 pm I believe, with a relatively high degree of confidence, that the annual real return on global stocks, with dividends reinvested, over the next 30 year period, will fall within the range between -10% and +15%. I am even more confident that the cumulative return will be no worse than -100%. Beyond that, not too sure.
Brilliant. Well, better get back to my apple polishing.
You're welcome. Please subscribe to my newsletter.

More seriously though, it really is difficult to forecast that far in advance because so many things might plausibly change about the world and, more importantly, about your own life in that time frame. Sometimes people think that they will never need to make withdrawals from their portfolio for the next 30 years, but a lot can happen. If you have less than 10x invested, then the fixed income portion of a 80/20 portfolio is less than two years expenses. It is not so hard for something like an extended job loss, unexpected and uninsured expenses, etc. to make you want to spend that much out of your portfolio at some unpredictable time over the course of an entire career. In contrast, if you have more than 10x invested, then you might end up wanting to retire sooner than 30 years, so 100/0 might not make sense.
Global Market Portfolio + modest tilt towards volatility (80/20->60/40 as approach FI) + modest tilt away from exchange rate risk (80% global+20% U.S. stocks; currency-hedge bonds) + tax optimization
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lp613
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Re: 30 Year Stocks Forecast

Post by lp613 »

asif408 wrote: Fri May 20, 2022 12:44 pm
lp613 wrote: Fri May 20, 2022 12:37 pm
asif408 wrote: Fri May 20, 2022 12:30 pm
I use approach #2 (I'm 90% foreign value), most here seem to prefer #1. You have to figure out what you can stick with through good and bad. If you are prone to performance chase, I'd go with approach #1. If you don't mind looking different and can deal with periodic underperformance vs certain benchmarks like the S&P then #2 might be the way to go. I prefer approach #2 because if these outperform over the next 10-15 years that would allow me to possibly take less risk in the last 15-20 years of my investment time frame. If I'm wrong I'll have to work longer, save more, or take more risk later. I prefer to take more risk now than when I'm 50 or 60.
But that's what I don't get. There seems to be two camps: Those who understand that stocks ALWAYS go up - when you give it enough time, and those who have NO IDEA about investing. Based on that, ANYONE who has 30+ (or even 15+ years!) should be 100% stocks!

Why are there any other options?
I think the biggest thing is that most people are risk averse and emotionally can't handle the large short term period drawdowns in a 100% stock allocation. That's generally where bonds and cash do help, at the cost of a lower long term return. There are also large periods of time where bonds beat stocks (I believe there have been periods as long as 30 years in the US, and probably more in other countries where this has been the case), so the 100% stock allocation is no guarantee of success. This is especially true if your stock investments are concentrated in one country (e.g., think Japan 1989 to now, Russian stocks a few months ago going to 0, etc.), and much less so if you are globally diversified.

However, the greatest challenges most people have with investing are emotional.
I too am risk averse, and I don't like to lose money. But to sell investments in your IRA in a bear market when you have 15 or more years on your hand is pure stupidity and insanity - not "personal preference". It doesn't take genius to process that over any 15 year period, your chances of losing principal are basically zero! Look in any OTC financial planning book to see this fact.
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Re: 30 Year Stocks Forecast

Post by vineviz »

lp613 wrote: Fri May 20, 2022 12:34 pm Where does 4-5% premium come from?
First principles of finance tell us that investors MUST require some sort of excess return as compensation for the additional risk of holding stocks instead of bonds.

But how BIG that premium should be can't be resolved on theoretical grounds, so we have to infer it from historical data. On average, it's been about 4% to 5%.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
abc132
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Re: 30 Year Stocks Forecast

Post by abc132 »

mega317 wrote: Fri May 20, 2022 12:51 pm
abc132 wrote: Fri May 20, 2022 12:45 pm you could easily capture 2-4% per year over whatever the market earns over the next 10 years.
How would this be done?
By adding regularly during downturns, and with a small initial portfolio relative to future contributions.
Last edited by abc132 on Fri May 20, 2022 1:18 pm, edited 1 time in total.
alex_686
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Re: 30 Year Stocks Forecast

Post by alex_686 »

lp613 wrote: Fri May 20, 2022 12:03 pm
alex_686 wrote: Fri May 20, 2022 11:52 am CAPE10 does a reasonable job if doing 10 year forecast. It is a often debated topic here but I like it for what it is - a very simple model that uses no propitiate information and give actionable information. Yes, it has wide error bars.

There are other modes out there. But 10 years tends to be the maximum. The further you go out the error bars and uncertainty increases.

10 years tends to be the sweet spot. Long enough to ignore short term noise, short enough that your error bars are reasonable.
I guess the question for me then is how should you act when you have 30 years on your hand?
As they say, “Man plans and God Laughs”.

So 2 points here.

First, we are faced with complex and evolving system. As such active management is much safer than “set it and forget it”. Now I don’t mean much in terms of active management. You are supposed to update your IPS every year because things change. I view this exercise akin to piloting a large cargo vessel. You are not going to make any quick tactical changes but it does force you to think a couple sets ahead. So you have wide margins.

Second, just because we are going to have high economic growth does not mean we will have high investment returns. Investment returns is based on the supply of capital and the demand of investors. Let us run through the scenario of secular stagnation, a opinion that I believe in. In the future there will be a low supply of investments. Many of the high growth areas are capital light. They just don’t need much investor money to grow. On the other hand there seems to be a glut of savings. A theory is that this is due to demographics and income inequity. So too few dollars chasing too few investments. Hence low returns.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
alex_686
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Re: 30 Year Stocks Forecast

Post by alex_686 »

burritoLover wrote: Fri May 20, 2022 12:14 pm Forecasts are useless for constructing a portfolio. That includes using CAPE10.

How should you construct a portfolio? Start with a global market cap weight total stock portfolio and add total bond based on your likelihood of panic selling and then add bonds closer to retirement to reduce sequence of returns risk. You can consider adding additional assets as a means of diversification that might include TIPS, small-cap value, gold, etc - whether those do you any good over the next 30 years - no one knows.
Yes, you need to do this stuff to write your IPS. How much should you contribute to savings (future consumption) verse current consumption. How much should you hazard in risky stocks verse safer bonds? Yes, the methods of determining this are complex and error prone. However the one saving grace is that they produce better results then historical analysis or heuristics.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
JPM
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Re: 30 Year Stocks Forecast

Post by JPM »

All forecasts are underlain by a set of assumptions, usually that the future will be similar to the past in important respects and that systems' behaviors in the future will be similar to what they have been in the past in important respects. If those assumptions are correct in regard to the stock market, and peace and prosperity continue for another 30 years and no future change in tax or financial policy become less favorable toward stock investing, and the bankers don't ruin the financial system beyond repair, then the stock market should continue to do well.

The long 19th century from 1815 to 1914 was a period of peace, prosperity, and relatively competent banking practices in the west that allowed for rapid scientific and industrial development in Europe, the US, and Japan. A similar period has been with us from 1945 to the present. It may continue for many more decades or even centuries but history does not suggest that as being the most likely. From 1914-1945 the industrialized world went on an orgy of capital destruction that much of it has been slow to recover from and apart from the US and maybe Japan and Germany, no other western country has come close to regaining the relative economic strength, relative industrial prowess, or geopolitical reach enjoyed in spring of 1914.

It has been said that Japanese could not conquer Hawaii in the 40s, so they bought most of it in the 90s. Germans could not conquer Ukraine in the 40s but Germans may be able to buy most of what's left of it in the 20s.
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Re: 30 Year Stocks Forecast

Post by SmallSaver »

I forecast they're going to go up, because if they don't I won't be able to ever retire.

Less flippantly, there is a difference between a forecast and a projection. It's impossible to forecast stock returns over 30 years, or over just about any time period really. It isn't a deterministic system, and even if it were that time period is way too long to be tractable. A forecast means taking an assessment of the current state of the system, applying a set of rules to it, and seeing how the system evolves. Think a weather forecast. They're really good for 5 days, pretty good for 10, and they totally fall apart after that.

Instead, you can make a projection. Take a reasonable set of variables, plug them into the system, and see what comes out. This isn't saying what's likely to happen, it's more like "if x then y." This is what climate models do, and if you read closely you'll see the actual modelers are careful to call them projections, not forecasts.

As a practical matter, you can make projections for your retirement planning. I think my expenses in retirement will be X, I think the safe withdrawal rate is Y, so I need Z to retire. I think a reasonable real rate of return on equities will be A, but they might be as bad as B or as good as C.

That rate of return is probably the number you're after, but again, it can't really be forecast. You can build a model, but the estimation of the structure, the inputs, and the changes of both 30 years into the future are really what drives the output. You're probably better off taking a guess for the central estimate (historical return?), plus a high and low bound, and calling it good. I use 4% real, but that's mostly a WAG.
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Re: 30 Year Stocks Forecast

Post by nisiprius »

The ten-year "forecasts" are bad jokes. If you can find a detailed report, not just a news media summary, they may show the range of the forecast and not just the median or average, and if you do you will see that on the face of it they are "forecasting" numbers like 6% plus-or-minus 5%. So the intermediate stuff is useless for detailed planning.

Jeremy Siegel in his famous book Stocks for the Long Run looked at three time periods, each of them longer than 60 years, and noted that the real return (after inflation) had been close to 6.6% in each of them. Between that and other data, at one time he was more or less suggesting that the stock market has some partial correcting tendency and tends to "cling" to 6.6%... but that's over periods of more than sixty years and many authorities, including Siegel himself, expect it to be lower in the future. And since the periods in question are much longer than 30 years, even at face value that, too, is useless for detailed planning.

Don't look for thirty-year "forecasts." There's a demand for such forecasts, so, of course, there is a supply of them. But it's all crude guesswork. You might as well do your own crude guesswork.

Really, your job is to create some sensible plan that does not depend on having even roughly accurate forecasts of stock returns over the next thirty years.
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Tellurius
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Re: 30 Year Stocks Forecast

Post by Tellurius »

I believe Rick Ferri wrote a few times here about the fundamental drivers of stock returns ie earnings growth and the speculative component (multiple of earnings willing to pay). Could anyone link to a post? It may provide the clarity you need
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Re: 30 Year Stocks Forecast

Post by vineviz »

nisiprius wrote: Fri May 20, 2022 2:14 pm Really, your job is to create some sensible plan that does not depend on having even roughly accurate forecasts of stock returns over the next thirty years.
This represents a nearly unnavigable contradiction: you can't create a "sensible plan" without "roughly accurate forecasts" of the relevant parameters upon which the plan must be built.

The very nature of planning involves making assumptions about the variables that we can't control.
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Re: 30 Year Stocks Forecast

Post by Beensabu »

lp613 wrote: Fri May 20, 2022 12:37 pm But that's what I don't get. There seems to be two camps: Those who understand that stocks ALWAYS go up - when you give it enough time, and those who have NO IDEA about investing. Based on that, ANYONE who has 30+ (or even 15+ years!) should be 100% stocks!

Why are there any other options?
The returns of all stock:bond AAs converge at some point during a major downturn. Which means there's no point in being 100/0 vs 50/50 up until that convergence point. It's taking on more risk and accepting higher volatility for no particular reason.

There is a point in being more aggressive later in accumulation when there is a larger balance that can benefit more from compounding returns during a bull market. However, that's also when you need to start worrying about SORR. So it's kind of scary. It's taking on more risk and accepting higher volatility for a real reason, but that risk can show up right at the wrong time and mess you up if you put off taking precautions for too long.

Anyway, for a 30-year time frame, I've come to understand that it's reasonable to plan around 5% real for world cap equities. If you tilt away from that towards a country, sector, style, size, etc., then it might be less or more -- it just depends on how the tilt does relative to world cap over that period (and you can't know that in advance, but you can bet on it anyway if you want). And 0-1% real for long term US treasuries.

Edit: Also, someone's timeframe to withdrawal could drastically shorten with little to no notice. Which is why you have cash reserves, right? It's money that you might need sooner rather than later. Otherwise, that cash would be invested in equities.
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Re: 30 Year Stocks Forecast

Post by rockthisworld »

lp613 wrote: Fri May 20, 2022 11:30 am Please let me know if this topic already exists.

I was wondering if there were a few good sources to find a 30 year forecast for US and non US Stocks.

I am invested 100% in stocks - 75% US (VTI) 25% Foreign (VXUS), though my net worth is not very high (about $250K, which $170K is equity in my house, $60K in IRAs & 529 and $20K cash, and plan to fully fund Roth IRAs every year). I am in early 30s and I have around 35 years to retirement. I am not a high earner, but my job is steady. Point is, that based on my understanding of Boglehead philosophy (I read The Bogleheads' Guide to Investing), and using the Vanguard Investor Questionnaire, given my personal situation, I can take a lot of risk (i.e. 100% stocks at this point in my life), and Ill have big chance I will come out ahead, perhaps with 7%-8% growth a year, on average.

However, given the current weak forecasts (that experts think that the strong historical growth in US stocks in the last 30 years are not going to be repeated the coming 30 years), I am concerned that this "set it, & forget it" approach wont really work.

Even in that book, it quotes from an expert at Portfolio Solutions that US Large Cap will grow at 7.5% before a 2% inflation over next 30 years. Is that still current? Where can I see that updated every year? Where can I see multiple opinions?
The loss of purchasing power in fiat currency will be the x factor over the next 30 years. I think using 2% is grossly underestimating the loss of purchasing power.
Right now CPI is 8.3% year over year. But yet it said shelter is up 5.1% using home owners equivilant rent. Shelter if used actual rent or home prices would be closer to 20%. So you know inflation is understated by government. And PPI (producers price index) came in around 11%.

I know its against BH philosophy to hold gold and some silver. But I value it as a hard money. Silver is cheap at $22 an oz. And gold at $1800 is still relatively cheap if compared to the currency supply and debt.

But hey 64% of Americans live paycheck to paycheck so if you are able to pay your bills, save, and most importantly to enjoy each day as best we can with the people we love and care about that is important. Because each day is a blessing.

You have worked hard to be where you are today. Just keep pushing forward, have a plan you feel comfortable with and keep up the good work!!
Have a blessed day,
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Re: 30 Year Stocks Forecast

Post by martincmartin »

One way of figuring out what to do is to figure out the most likely outcome, then plan for that. Let's say there are 100 possible outcomes. The average chance of each outcome is 1% by definition.

Suppose, with great effort, you find the most likely outcome has a 5% chance. That's 5x the baseline! But still, you don't want to just plan for that and ignore the other 95%.

So you don't really want a single forecast of the most likely outcome. Instead, you want to know a reasonable range of outcomes, and make a plan that will succeed or any of those.

Things could go up; things could go down. Looking over periods of 35 years, 50% drops in the stock market are common, i.e. most 35 year periods in the US contain a drop of around 50% or more. The great depression had a drop of 89% (!). So almost 9/10 of the value in the stock market was wiped out, yet it returned and exceeded its old value in a few years.

As someone who is still earning, you're in great shape. Bill Bernstein says (paraphrasing): "savers who have many decades of saving in their future should get down on their knees and pray for a bad bear market." Investing when the stock market is down is actually when you make your biggest returns, you're buying low.

If you save diligently and keep it in stocks, there's no sure fire way to know how much you'll have in 35 years, or when you'll be able to retire. Just save at least 15% of your income and revisit in, say, 20 years.
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Re: 30 Year Stocks Forecast

Post by Tdubs »

lp613 wrote: Fri May 20, 2022 12:17 pm
59Gibson wrote: Fri May 20, 2022 12:11 pm OP, Why do you say you're 100% stocks (2x)??. You must know you're not even close to 100%. Strange post.

Bc of how much of my net worth is in my house? If that's the why you're saying that, I get what you mean. Obviously though I'm only focused on my investments.

But if you're saying that for a different reason, than please explain. Bc I'm saying that since all my investments (and my plan - as of now - for my future investments, probably till I'm about 45) will be 75% VTI (US stocks) and 25% VXUS (Foreign stocks) = 100% stocks.

So why do you say that?
That you were referring to your investments was obvious to me.
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Re: 30 Year Stocks Forecast

Post by rich126 »

If you got 2% real return over that period I'd consider it a success. Too many issues including declining populations, and commodity shortages including food. And throw in a few issues not allowed here and you have a lot of problems that have been largely covered up with all of the "free" money provided by the government and extremely low interest rates prior to that.
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Re: 30 Year Stocks Forecast

Post by rockthisworld »

rich126 wrote: Sat May 21, 2022 10:44 am If you got 2% real return over that period I'd consider it a success. Too many issues including declining populations, and commodity shortages including food. And throw in a few issues not allowed here and you have a lot of problems that have been largely covered up with all of the "free" money provided by the government and extremely low interest rates prior to that.
Yeah I would call that a success. And saving the dollar will be harder than it was in the early 80s. With this amount of debt in the system.
They have been kicking the can since 2008. How much further can we keep this debt fiat currency system going? Stay tuned.
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Re: 30 Year Stocks Forecast

Post by j.click »

Vanguard's 10 year forecast can be found here:https://advisors.vanguard.com/insights/ ... smarch2022
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Re: 30 Year Stocks Forecast

Post by valleyrock »

One historical bit of information, which I believe is correct, and sometimes consider when thinking about historical information, is that the stock market has never lost money over any 10 year period.

So, a 10-year time horizon might be "safe" in terms of probably not losing money. Multiply that x3, and then you have your 30 year downside: probably breaking even. And, it could be better than that, because in many 10 year periods, stocks have gone up. No doubt sequential factors enter in, making this a very simplistic approach, but it's perhaps as good as any, especially if one avoids nettlesome quantitation.

Of course, past performance provides zero assurance of future outcomes, so there's that, which gets back to basic asset allocation, the three fund portfolio, considering what stage of investing one is in, and like that there.
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Re: 30 Year Stocks Forecast

Post by Beensabu »

valleyrock wrote: Sun May 22, 2022 10:14 am the stock market has never lost money over any 10 year period.
The global stock market, yeah? Coz the US stock market has, even considering total return, but not periodic continuing contributions. Periodic continuing contributions make up for a lot, especially in a down market. Funny how that works out that way.
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Re: 30 Year Stocks Forecast

Post by alluringreality »

lp613 wrote: Fri May 20, 2022 12:17 pm Obviously though I'm only focused on my investments.

But if you're saying that for a different reason, than please explain.
There are different ways to calculate percentages. It can be subjective, since percentages mainly depend on what exactly is included.

$60K in IRAs & 529 and $20K cash might be interpreted as 75% stocks and 25% cash.

Some people "bucket" an emergency fund, so basically they don't include it as part of a potential portfolio amount, which might mean ignoring the cash for 100% stocks.

Sometimes people will include debt as a negative bond, and in that case they may offset any fixed income. For example some people would interpret $20k debt as offsetting the $20k cash for 100% stocks. Debt can potentially result in greater than 100% stocks figured this way. It's potentially debatable if only including debt without property equity or asset value necessarily makes sense. Some people effectively choose how much to put into paying down debt, and how much to put into investments, which could be a practical consideration when debt is involved.
lp613 wrote: Fri May 20, 2022 11:30 am Is that still current? Where can I see that updated every year? Where can I see multiple opinions?
Various companies (Vanguard, JP Morgan, etc) put out current market estimates at least yearly or quarterly. The "error bars" are fairly wide, so it's generally a bit debatable to say how well past estimates ended up working out. Realistically the range of potential returns for stocks is much wider than +/- 0.5%.
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