Vanguard expectations for 2016

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Quark
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Vanguard expectations for 2016

Post by Quark » Tue Feb 02, 2016 11:56 am

What to expect in 2016? Vanguard's CEO and investment chief share their views, including:
This will be the third year in a row where our outlook is a bit guarded for the next decade. We think returns over that time are likely to be lower than long-term historical norms. For several reasons, stock and bond returns will probably be muted. That means investors would be wise to expect returns from a balanced portfolio of stocks and bonds to be two to three percentage points below what they may have experienced in the past.
https://personal.vanguard.com/us/insigh ... iew-022016

livesoft
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Re: Vanguard expectations for 2016

Post by livesoft » Tue Feb 02, 2016 11:57 am

Summary: More of the ol' same same ol'. This time it won't be different.
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goingup
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Re: Vanguard expectations for 2016

Post by goingup » Tue Feb 02, 2016 12:23 pm

Quark wrote:What to expect in 2016? Vanguard's CEO and investment chief share their views, including:
... For several reasons, stock and bond returns will probably be muted.
https://personal.vanguard.com/us/insigh ... iew-022016
"Muted returns" is such a docile way of describing the effects of all this volatility. Thanks for the link.

investor1
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Re: Vanguard expectations for 2016

Post by investor1 » Tue Feb 02, 2016 12:27 pm

I guess this means I can still buy assets for a low price.

closetoreality
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Re: Vanguard expectations for 2016

Post by closetoreality » Tue Feb 02, 2016 1:32 pm

No offense to VG, but how the hell do they think they know whats coming?

sport
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Re: Vanguard expectations for 2016

Post by sport » Tue Feb 02, 2016 1:54 pm

closetoreality wrote:No offense to VG, but how the hell do they think they know whats coming?
Everyone is entitled to an opinion. A lot of people want to know what Vanguard's opinion is. Of course, it is nothing more than an informed opinion.

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Joe Jones
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Re: Vanguard expectations for 2016

Post by Joe Jones » Tue Feb 02, 2016 2:26 pm

My question to Vanguard:
Since we base our asset allocation on risk vs reward, should we not lower our exposure to equities?
0+2=1

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JoMoney
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Re: Vanguard expectations for 2016

Post by JoMoney » Tue Feb 02, 2016 3:37 pm

Joe Jones wrote:My question to Vanguard:
Since we base our asset allocation on risk vs reward, should we not lower our exposure to equities?
They're still projecting higher returns for equities, but as always - it involves risks you may not want to take. My highlights from their assessment:
https://personal.vanguard.com/pdf/ISGVEMO_122015.pdf
... U.S. Treasuries, have ten-year median expected returns centered in the 2%–4%
... The bond market continues to expect U.S. Treasury yields to rise, particularly at the short end of the yield–maturity curve and around its medium-term range, as the Fed liftoff appears imminent. The long end of the yield curve is typically anchored to long-term inflation expectations, and hence the long-term rates are not expected to rise nearly as much as the short-term rates
...TIPS returns is wider than that of nominal Treasury bonds. The expected median long-term return of a U.S. TIPS portfolio is lower than that of a similar-duration nominal Treasury portfolio by a modest amount that represents the estimated inflation-risk premium.

Equity market outlook: Not bearish, but still guarded
...our medium-run outlook for global equities remains guarded, in the 6%–8% range
...below both the longrun historical annualized average return (10.0%)
...adjusted for future inflation, we estimate a 55% likelihood that a global equity portfolio will produce a 5% average real return over the decade
...long-term outlook is not bearish, and can even be viewed as constructive, when adjusted for the low-interest-rate environment.Barring an unforeseen setback, a sharp equity market correction is not warranted based on our proprietary valuation analysis.
...expected return outlook for non-U.S. equity markets is modestly higher from a U.S. investor’s perspective
...we caution investors against implementing either tactical tilts based on just the median expected return
...although valuations are useful in predicting stock returns over the long term, they still leave more than half the volatility of long-run returns unexplained


...We do not forecast expected returns for commercial real estate
... REITs are a subsector of the equity market, so all of REITs’ potential diversification benefits should already be captured in a broad-market portfolio.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Hodor
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Re: Vanguard expectations for 2016

Post by Hodor » Tue Feb 02, 2016 6:45 pm

investor1 wrote:I guess this means I can still buy assets for a low price.
Actually what he seems to be implying is that assets are expensive by historical standards.

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Toons
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Re: Vanguard expectations for 2016

Post by Toons » Tue Feb 02, 2016 6:59 pm

That is fine with me.
We are content to live beneath our means anyway :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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tennisplyr
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Re: Vanguard expectations for 2016

Post by tennisplyr » Wed Feb 03, 2016 9:12 am

In this case, if VG is right, they look good, if they are wrong, who cares.
Those who move forward with a happy spirit will find that things always work out.

investor1
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Re: Vanguard expectations for 2016

Post by investor1 » Wed Feb 03, 2016 2:18 pm

Hodor wrote:
investor1 wrote:I guess this means I can still buy assets for a low price.
Actually what he seems to be implying is that assets are expensive by historical standards.
My assumption is that today's prices will be much lower than they will by the time I begin selling my assets. The idea that the price of these assets not going up very much in the near future gives me more time to buy at a lower price than they would otherwise be.

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