“The equity market doesn’t have to do too well to beat the bond market,” Roger Ibbotson, a Yale University finance professor and founder of Ibbotson Associates, said.
Siegel estimates the average real returns from stocks will be between 8% to 9%. Bogle, Ibbotson and Ted Aronson, a founder of investment adviser Aronson Johnson Ortiz, project U.S stocks will rise 7% before inflation over the next few decades. Rob Arnott, chairman of asset manager Research Affiliates LLC, calculates an annualized average return of 5% over the next 10 years.
“People are expecting the markets to do their saving for them by delivering a high return. That’s just not realistic,” Arnott warned. “Ratchet down your return expectations, broaden the tool kit, and recognize that real returns are what matters.”
SPDR S&P 500 ETF (NYSEArca: SPY)
Chart source: Yahoo Finance
For more information on the broader stock market, visit our S&P 500 category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own SPY.