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 non-U.S. stocks, especially emerging markets, than U.S. over the next decade.”

The article notes that these return estimates lean more toward the intermediate- than the long-term and are therefore most relevant to investors looking at a similar time horizon.

Here’s a summary of the forecasts the article reports from some of the largest firms:

  • BlackRock Investment Institute: 7% return for U.S. large caps over next decade; 9% for non-U.S. large caps; 3.3% for U.S. Aggregate Bond Index.
  • Vanguard forecasts nominal returns for U.S. stock market in the 3% to 5% range during the next decade and returns between 6% and 8% for non-U.S. equities. The firm expects returns of between 2.5% and 4.5% for global fixed-income markets. Last October, the late John Bogle predicted 4%-5% nominal returns for stocks; 4% nominal returns for bonds over next decade.
  • GMO: Negative 4.1% real returns for U.S. large caps over next seven years; negative 0.2% real returns for U.S. bonds; 4.4% real returns for emerging markets stocks; 2.9% real returns for emerging markets debt.
  • J.P. Morgan Asset Management: 5.25% nominal return for U.S. equities over a 10- to 15-year horizon; 4.5% nominal return for U.S. investment-grade corporate bonds over 10- to 15-year holding period.
  • Morningstar Investment Management: 1.8% 10-year nominal returns for U.S. stocks; 3.3% 10-year nominal returns for U.S. bonds.
  • Research Affiliates: 0.7% real returns for U.S. large caps over next ten years; 0.5% real returns for the Barclays U.S. Aggregate Bond Index.

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