By our own estimates, we expect
the nominal total return on the S&P 500 over the coming decade to average about 3.8 % annually, though with very broad cyclical fluctuations producing that overall result.
In any event, our view is that the 10 - year
nominal total return on such conventional asset allocations is likely to be less than 2 % annually.
We presently estimate
a nominal total return on the S&P 500 averaging 4.1 % annually over the coming decade.
They also warn that because of extended zero - interest policy by the Fed, security valuations have advanced to the point where prospective
nominal total returns on a conventional portfolio mix are likely to average well below 2 % annually, with negative real returns, over the coming 12 - year period.
Not exact matches
We've recently emphasized that our estimates for probable S&P 500
nominal total returns have now declined below zero
on every horizon of 7 years and shorter.
The following chart shows the same data
on an inverted log scale (blue line, left), along with the actual subsequent 12 - year
nominal average annual
total return of the S&P 500 Index (red line, right).
With the S&P 500 within about 8 % of its highest level in history, with historically reliable valuation measures at obscene levels, implying near - zero 10 - 12 year S&P 500
nominal total returns; with an extended period of extreme overvalued, overbought, overbullish conditions replaced by deterioration in market internals that signal a clear shift toward risk - aversion among investors; with credit spreads
on low - grade debt blowing out to multi-year highs; and with leading economic measures deteriorating rapidly, we continue to classify market conditions within the most hostile
return / risk profile we identify — a classification that has been observed in only about 9 % of history.
On that point, it's worth noting that we currently estimate a prospective 10 - year
nominal total return for the S&P 500 of just 3.9 % annually.
On the basis of nominal total returns (including dividends), we estimate zero or negative returns for the S&P 500 on every horizon shorter than about 8 year
On the basis of
nominal total returns (including dividends), we estimate zero or negative
returns for the S&P 500
on every horizon shorter than about 8 year
on every horizon shorter than about 8 years.
On a 12 - year horizon, we project likely S&P 500 nominal total returns averaging close to zero, with the likelihood of an interim market loss on the order of 50 - 60 % over the completion of the current cycl
On a 12 - year horizon, we project likely S&P 500
nominal total returns averaging close to zero, with the likelihood of an interim market loss
on the order of 50 - 60 % over the completion of the current cycl
on the order of 50 - 60 % over the completion of the current cycle.
On that assumption, the corresponding 10 - year projection for
nominal total returns in stocks would be -LSB-(1.0494) ^ 16 / (1.10) ^ 6] ^ (1/10)-1 = 2.0 %.
The chart below shows this relationship using market capitalization to corporate gross value added (blue,
on an inverted log scale) versus actual subsequent 12 - year S&P 500
nominal total returns (red).
Based
on the valuation measures most strongly correlated with actual subsequent
total returns (and those correlations are near or above 90 %), we continue to estimate that the S&P 500 will achieve zero or negative
nominal total returns over horizons of 8 years or less, and only about 2 % annually over the coming decade.
On valuation measures most strongly correlated with actual subsequent S&P 500 nominal total returns, we presently expect negative total returns for the S&P 500 on a 10 - year horizon, and total returns averaging only about 1 % annually over the coming 12 - year period (chart
On valuation measures most strongly correlated with actual subsequent S&P 500
nominal total returns, we presently expect negative
total returns for the S&P 500
on a 10 - year horizon, and total returns averaging only about 1 % annually over the coming 12 - year period (chart
on a 10 - year horizon, and
total returns averaging only about 1 % annually over the coming 12 - year period (chart).
The next chart shows the margin - adjusted CAPE
on an inverted log scale (blue), along with actual subsequent S&P 500 average annual
nominal total returns (red).
Implications for Required
Return Rates Investors must calculate their total required rate of return (RRR) on a nominal basis, taking into account the effect of infl
Return Rates Investors must calculate their
total required rate of
return (RRR) on a nominal basis, taking into account the effect of infl
return (RRR)
on a
nominal basis, taking into account the effect of inflation.