Bond returns are expected to match single-digit returns on stocks, according to Vanguard and others; international investments are the best bets.
The era of big market returns is over. It is time for investors to adjust their expectations. That’s what many Wall Street firms and consultants tell their clients.
Look for lower US equity returns over the next decade than ever before, and expect US bond returns to be in line with equity returns. The best returns are expected for foreign stocks and bonds. Returns for most asset classes should be good. “The next 10 years are going to be different than the last 10 years,” said Jim Masturzo, partner and chief investment officer of multi-asset strategies at Research Affiliates, based in Newport Beach, Calif. “It will be normal.”
Expect single-digit US stock returns
With inflation in the high 40s, amid rising interest rates and falling prices, long-term U.S. equity returns are expected to be in the low to mid-quarter range. . This compares to a historical annual average of 12% to 13% before inflation, and well below annual returns of nearly 16% over the past decade. This is clearly a new world that investors are not used to after decades of low prices and near-zero interest rates in the past 10 years. “Returns will be stronger in terms of history and especially in the last two years, especially for equities,” says Roger Aliaga-Diaz, director of portfolio construction and chief economist for the Americas at Vanguard Group. say.
Contractual returns to competitor stocks
On the positive side, bonds appear to give equities a tough time as fixed income returns are expected to rival those of equities. Joseph Carson, an economic consultant and former chief economist at AllianceBernstein, says, “Returns in the stock market are likely to equal equity returns. Equity returns over the next decade -appears “small” at 4%-5%, he says, mainly because “equity returns for three of the last forty years are higher than average.” Read: As ESG Draws Fire, Vanguard Expands Sustainable-Funds Lineup
Stocks benefited from the collapse of inflation and bond yields in the 1980s. Stable growth and the expectation of “a new period of long-term growth and income” pushed the stock to return to the high of 1990. And “in the decade ending in 2020, it is zero rate and the majority of sales” That led to huge gains in stocks, Carson said.
Ten years lost
The last ten years turned out to be 2000 to 2009, a period that included the terrorist attacks of September 11, 2001, and two painful recessions and bear markets that lowered yields and opened the door to a financial crisis. is easy. In what became known as the lost decade, stocks produced a negative annual return of 0.95%, the only decade outside of the Great Depression in which total returns for that period fell.
At the beginning of the decade, the bubble in technology, telecommunications and media stocks burst, leading to a recession and bear market of 2000-02, when stocks fell almost 50%. Shortly thereafter, the global financial crisis of 2007-09 was triggered by a collapse of the banking and housing industry that made credit and provided interest rates on low-interest loans and – not traditional. mortgage loans. Secured and guaranteed debt securities and sold as a stable and secure investment.
As housing prices soared, the Federal Reserve began raising rates to cool the market, leading to a massive deleveraging of mortgages and the subsequent financial collapse. The result: the deepest and longest recession since World War II. The price 에볼루션게이밍 fell about 55%. The unemployment rate has doubled.
Interventions to protect the financial system and the economy during the crisis introduced negative monetary policies that were recently reinstated during the crisis of 2020, creating meaningful inflation and make the price drop. high level since 1980. In an effort to rein in rising prices, the Fed has hiked interest rates six times this year and plans to do so until it sees clear signs of inflation. decreases and returns to its rate of 2% more. 8% This boosted bond yields, driving down their prices and sending stocks tumbling. No one expects inflation and interest rates to stay at current levels for the next 10 years, but they will be higher than the previous decade. That will affect the price. The issue of chains
“In fact, the case of bonds and portfolios is coming back,” says Vanguard’s Aliaga-Diaz. “High yields strengthen the case for bonds.”