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The Next Ten Years: Tougher Times Ahead – May 28, 2019

The Next Ten Years: Tougher Times Ahead

Twice a year we update our long-term returns projection for the major asset classes. It is worth nothing a few key points reflecting the difficulty of today’s valuations and the likely economic and inflation environment over the next decade:

– A poor starting point heralds historically-low real returns on global balanced portfolios of equities, fixed-income, commodities and cash. Bonds will be the main constraint on aggregate returns.

– Investors should maintain a structural overweight toward equities and credit versus government bonds and commodities.

– A decade out, stock prices are projected to be only marginally higher than today in real terms, but decent dividend yields will significantly bolster total returns.

– Tactical asset allocation to limit downdrafts ahead of and during a likely recession in the next few years will be important given the expected limited absolute returns available over the coming decade.