Market Overview Analysis by Lance Roberts covering: S&P 500. Read Lance Roberts's latest article on Investing.com
I was emailed several times about a recent Morningstar article about J.P. Morgan’s warning of lower forward returns for theover the next decade. That was followed up by numerous emails about Goldman Sachs’ recent warnings of 3% annualized returns over the next decade.
While such a statement may seem obvious to long-time students of markets, the outsized returns over the last decade have many questioning whetherI used the total return data from Aswath Damodaran, a Stern School of Business professor at New York University. The chart shows that from 1928 to 2023, the market returned 8.45% after inflation. However, after the financial crisis in 2008, returns jumped by nearly four percentage points for the various periods.
The Federal Reserve and other central banks worldwide have spent the last decade engaging in highly accommodative monetary policies. Near-zero interest rates and massive asset purchasessettles in at or above the Fed’s 2% target rate, central banks may be forced to pull back on these policies. While the Federal Reserve has been reducing its balance sheet, Government spendinghas started cutting interest rates, it has stated that it does not foresee the Fed Funds rate returning to zero.
No matter how many valuation measures we use, the message remains the same: From current valuation levels, investors’ expected rate of return over the next decade will likely be lower.I am suggesting that based on various measures, forward returns will be relatively low compared to what we witnessed over the last eight years.does not mean that markets will produce single-digit rates of return each year for the next decade.That is the nature of investing in the markets.
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