Jack Bogle's Future Growth Projection

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RetiredWithDementia
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Jack Bogle's Future Growth Projection

Post by RetiredWithDementia » Wed Nov 22, 2017 11:48 am

I sure most of you saw the articles about Mr. Bogle's views on the growth of US equity markets over the next number of years, can't recall how far out he talked about. But he said 4% growth in equity market, and I assume that to be SP 500 or something similar. Others in same article suggest 4% to 6%. My question is whether Mr. Bogle's 4% or so projection is before or after inflation is counted in. I think it is called real versus nominal or something similar. Is he saying growth of 6% but with 2% inflation to come up with 4%, or is it 4% with inflation yet to be deducted? I can't explain better than this, so excuse my failing to be clearer. I clear in my head, just not anywhere else. Thanks you.

lack_ey
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Re: Jack Bogle's Future Growth Projection

Post by lack_ey » Wed Nov 22, 2017 12:06 pm

The way I've usually seen it from him, he says 6% nominal based on fundamentals and valuations not changing, or maybe 4% nominal if valuations fall in the case that may be more likely, for US equities over the medium term (say 10 years). This is not accounting for inflation, which may be some 2% or so in the average future.

There's actually a pretty recent interview:
http://beta.morningstar.com/videos/8307 ... turns.html
Benz: Right. One of the things we always talk about when we sit down and do these interviews is your forward-looking market expectations. You take it asset class by asset class. I think you have a very intuitive approach when thinking about market returns. Can we start with stocks? What's your forecasting for stocks? I'm guessing it's pretty a sober outlook given how long running this equity market rally has been.

Bogle: Not to pick nits, but I really don't consider it a forecast. I consider it reasonable expectations. My reasonable expectations for the coming decade--as in my new book, The Little Book of Common Sense Investing, 10th anniversary edition just coming out--I'm pretty conservative. I look at the sources of returns, that's all I do, and the fact that other people don't do it that way doesn't bother me in the slightest. I look at investment return and that's today's dividend yield, which is less than 2% for the S&P 500, and I look future earnings growth. While future earnings growth has averaged 5% or 6%, I'm looking for a lower future earnings growth, say 4%. I got my 2% dividend yield, there's no arguing about that, and I'm guessing the earnings growth will be slower. So, that gives me a 6% investment return from the fundamentals of the marketplace.

Now the other part of it is not investment return, but what I call speculative return. That is valuations. If a valuation goes from 10 times earnings to 20, that adds 7% a year over a decade. It's kind of amazing. We're not in anywhere near that extreme territory, but I think valuations will probably take 2 percentage points a year off that 6, getting to 4.

Where does that come from? Well, we're looking at a price/earnings multiple on the S&P. By my standards, past reported earnings, not by Wall Street's standards, future operating earnings--there's a big difference between the two--so, I have the P/E at about 25 right now. If it goes down to 18, we'll lose a couple of points in valuation, which will take that 6 down to 4.

ebrasmus21
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Re: Jack Bogle's Future Growth Projection

Post by ebrasmus21 » Wed Nov 22, 2017 12:08 pm

That's going to really suck if Jack ends up being right.

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Toons
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Re: Jack Bogle's Future Growth Projection

Post by Toons » Wed Nov 22, 2017 12:08 pm

Keep Investing
:happy
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lack_ey
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Re: Jack Bogle's Future Growth Projection

Post by lack_ey » Wed Nov 22, 2017 12:11 pm

ebrasmus21 wrote:
Wed Nov 22, 2017 12:08 pm
That's going to really suck if Jack ends up being right.
A few percentage a year above bonds is a reasonable equity risk premium, maybe even more given volatility these days. Any positive return would be nice. Many actually (and not the permabears) are more pessimistic.

In any case, the actual outcome is likely going to be quite different anyway, but you better be prepared for the 50% or so that may be worse than the projected point estimate.

RetiredWithDementia
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Re: Jack Bogle's Future Growth Projection

Post by RetiredWithDementia » Wed Nov 22, 2017 12:32 pm

Thanks for the replies. It seems then that he was using nominal, so 4% would be 2% real, or 6% would be 4% real, and so forth. I know it will be whatever it might be, but I have followed his advice and widsom for all my years up to now, and I can't think of not following now. Thanks again.

Oh, I have already put my plans in place, had them in place a coupld decades before the dmentia man got me. I only 67, but I got Parkinson and Dementia, not a good combo. My wife is taken care of, my son and his family taken care of, assuming he keeps a good job to his retirement. I think I will do fine whether it be 2 or 4 or 6, but if it is 2 then my wife might start thinking about doing something, but I tell her all the time to just do nothing as Mr. Bolgle likes to say. Except to do what needs to be done to keep basic asset mix at our desired ratio. Good news is my son's wife is accountant and knows a lot of stuff, but not too much yet, but she is getting the idea of what Bogle is all about. Thanks for replies.
Last edited by RetiredWithDementia on Wed Nov 22, 2017 12:39 pm, edited 1 time in total.

ebrasmus21
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Re: Jack Bogle's Future Growth Projection

Post by ebrasmus21 » Wed Nov 22, 2017 12:33 pm

lack_ey wrote:
Wed Nov 22, 2017 12:11 pm
ebrasmus21 wrote:
Wed Nov 22, 2017 12:08 pm
That's going to really suck if Jack ends up being right.
A few percentage a year above bonds is a reasonable equity risk premium, maybe even more given volatility these days. Any positive return would be nice. Many actually (and not the permabears) are more pessimistic.

In any case, the actual outcome is likely going to be quite different anyway, but you better be prepared for the 50% or so that may be worse than the projected point estimate.
We will be saving. Then we will do some more saving after that while hoping for the best.

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cfs
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Re: Jack Bogle's Future Growth Projection

Post by cfs » Wed Nov 22, 2017 2:35 pm

Just keep investing and forget about it. If you are still concerned then find his previous 10-year forecast [past decade] and compare the number to the past 10-year return of the Vanguard Total Stock Market Index Fund [VTSMX]. Good luck with your investments, Happy Thanksgiving, Merry Christmas, thanks for reading.
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JoMoney
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Re: Jack Bogle's Future Growth Projection

Post by JoMoney » Wed Nov 22, 2017 3:17 pm

Mr. Bogle is almost always doing a 10 year forecast, if he didn't specify that, I would wager that's what he's looking at.

The past 20 years have had some pretty high highs and pretty low lows, If you're fuzzy with the start and stop dates a bit, you can find a period that would match whatever 10 year return you want within a very broad range.
"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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Re: Jack Bogle's Future Growth Projection

Post by abuss368 » Fri Nov 24, 2017 1:19 pm

Most importantly "stay the course" and keep investing.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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nedsaid
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Re: Jack Bogle's Future Growth Projection

Post by nedsaid » Fri Nov 24, 2017 1:26 pm

ebrasmus21 wrote:
Wed Nov 22, 2017 12:08 pm
That's going to really suck if Jack ends up being right.
This is why many of us are increasing our allocations to International stocks. Future expected returns there are higher, particularly for emerging markets.
A fool and his money are good for business.

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Re: Jack Bogle's Future Growth Projection

Post by mickeyd » Fri Nov 24, 2017 1:27 pm

You know the proper AA for you and your gang, so stick with it.

What are your alternate options? Stash more into risky alternative investments? Stash more into more conservative cash-like vehicles or bonds? Stash a bunch into local rental houses that you will need to manage?

6%, 4%, 2%...take what the market gives you and go back to sleep.
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

ebrasmus21
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Re: Jack Bogle's Future Growth Projection

Post by ebrasmus21 » Sun Nov 26, 2017 4:27 pm

nedsaid wrote:
Fri Nov 24, 2017 1:26 pm
ebrasmus21 wrote:
Wed Nov 22, 2017 12:08 pm
That's going to really suck if Jack ends up being right.
This is why many of us are increasing our allocations to International stocks. Future expected returns there are higher, particularly for emerging markets.
Hopefully my 401K will get a good international fund option soon. In my tIRA I'm using a TR fund so I'm getting a healthy dose of Int there.

WanderingDoc
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Re: Jack Bogle's Future Growth Projection

Post by WanderingDoc » Sun Nov 26, 2017 6:49 pm

RetiredWithDementia wrote:
Wed Nov 22, 2017 12:32 pm
Thanks for the replies. It seems then that he was using nominal, so 4% would be 2% real, or 6% would be 4% real, and so forth. I know it will be whatever it might be, but I have followed his advice and widsom for all my years up to now, and I can't think of not following now. Thanks again.

Oh, I have already put my plans in place, had them in place a coupld decades before the dmentia man got me. I only 67, but I got Parkinson and Dementia, not a good combo. My wife is taken care of, my son and his family taken care of, assuming he keeps a good job to his retirement. I think I will do fine whether it be 2 or 4 or 6, but if it is 2 then my wife might start thinking about doing something, but I tell her all the time to just do nothing as Mr. Bolgle likes to say. Except to do what needs to be done to keep basic asset mix at our desired ratio. Good news is my son's wife is accountant and knows a lot of stuff, but not too much yet, but she is getting the idea of what Bogle is all about. Thanks for replies.
Have you considered a plant-based diet? There is good evidence that those following this diet have as much as 4-5X LESS chance of developing Alzheimer's and possible other. I know you already have the condition, but it wouldn't hurt to try.
One day it suddenly dawned on me that I had won the real estate lottery. | I'm not looking to get rich quickly. I'm not looking to get rich slowly. I'm looking to get rich for sure.

Bigbonds
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Re: Jack Bogle's Future Growth Projection

Post by Bigbonds » Sun Nov 26, 2017 6:57 pm

ebrasmus21 wrote:
Wed Nov 22, 2017 12:08 pm
That's going to really suck if Jack ends up being right.

If you look hard enough you can find him making these same predictions year after year since after the crash in 2008. Jack is a great man but when it comes to predicting the stock market future he is about as right as a broken watch. Warren Buffett says the future for U.S. stocks is phenomenal so take your pick.

ebrasmus21
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Re: Jack Bogle's Future Growth Projection

Post by ebrasmus21 » Sun Nov 26, 2017 7:01 pm

Bigbonds wrote:
Sun Nov 26, 2017 6:57 pm
ebrasmus21 wrote:
Wed Nov 22, 2017 12:08 pm
That's going to really suck if Jack ends up being right.

If you look hard enough you can find him making these same predictions year after year since after the crash in 2008. Jack is a great man but when it comes to predicting the stock market future he is about as right as a broken watch. Warren Buffett says the future for U.S. stocks is phenomenal so take your pick.
I'm optimistic by nature and I don't want to fight against my own nature so I suppose I'll side with W.B. I have a long ways to go before I get to FIRE so I will be cautiously optimistic that future goals are well within sight.

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