Strategists at Goldman Sachs, led by David Kostin, estimate that the S&P 500 will generate average annual returns of 6% over the next decade. This according to an article in MarketWatch. The Goldman team arrived at their estimate using five factors: Absolute valuations Relative valuations Equity allocations Dividend yield estimates Economic modeling “To make a long story very short,” the article says, “the cyclically adjusted price-to-earnings ratio is a high 26.5, but interest rates are… Read More
According to a recent article in Morningstar, “even long-term, strategically-minded investors need some type of market-return forecast to craft a financial plan.” Morningstar assembled a compilation of return expectations from market experts, noting a few overlaps among the forecasts: “Starting yields on intermediate-term bonds, historically a good predictor of future returns from bonds, suggest that bonds will give U.S. equities a run for their money over the next decade;” “Market forecasts suggest higher returns from… Read More
A Financial Times article highlights and challenges the common practice of long-term forecasting. Opening with a George Eliot quote – “Among all forms of mistake, prophesy is the most gratuitous” – the piece makes no bones about challenging the value of long-term forecasts. It argues: “Either they are so short term they are often liable to be as wrong as any other prediction; or they are so long-run that they are practically useless and only… Read More