Schwab's market predictions next 10 years

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confusedinvestor
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Schwab's market predictions next 10 years

Post by confusedinvestor » Wed Jun 13, 2018 1:22 am

Schwab's market forecast -
https://www.schwab.com/resource-center/ ... the-future

What do you think about this Schwab article ?

Typically companies like Vanguard, Schwab, Fidelity are not right on market commentary, outlook.

Vanguard on 2017 outlook as below and we all know what market did on 2017.

https://americas.vanguard.com/docs/lite ... k-2017.pdf

ps: I dont change my savings, investing, AA b/c of such articles, but, would you consider changing your "SWR" rates b/c of such articles ?

TheOscarGuy
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Re: Schwab's market predictions next 10 years

Post by TheOscarGuy » Wed Jun 13, 2018 6:00 am

confusedinvestor wrote:
Wed Jun 13, 2018 1:22 am
Schwab's market forecast -
https://www.schwab.com/resource-center/ ... the-future

What do you think about this Schwab article ?

Typically companies like Vanguard, Schwab, Fidelity are not right on market commentary, outlook.

Vanguard on 2017 outlook as below and we all know what market did on 2017.

https://americas.vanguard.com/docs/lite ... k-2017.pdf

ps: I dont change my savings, investing, AA b/c of such articles, but, would you consider changing your "SWR" rates b/c of such articles ?
I am not close to retirement so I can not comment on SWR.
I have read other posts here where a lot of smart folks have been saying the same thing that stocks will not return as much for the next decade.
I consider my alternatives: I have a US-bias so I don't feel changing my AA to more international. I don't want to be out of stock market because experts have been wrong in the past, and there aren't any worthwhile alternatives for me. Since my time horizon is long, these "warnings" are immaterial to me, and I disregard them. I am in 3-fund portfolio and will not change it based on expected returns predictions for the next decade.

columbia
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Re: Schwab's market predictions next 10 years

Post by columbia » Wed Jun 13, 2018 6:06 am

The prediction will definitely be wrong - it’s a matter of to what degree and in which direction. As that’s unknown, it’s not actionable.

Dantes
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Re: Schwab's market predictions next 10 years

Post by Dantes » Wed Jun 13, 2018 6:14 am

Its a perfectly reasonable article. If people want predictions they could find a lot worse, and if they looked around they would find basically the same projections in lots of different places. Lower US returns, stronger international returns, lower bond returns has been the general consensus for some time now.

As for changes to anything because of this sort of projection: No. I plan for 2% real gain from a balanced asset allocation. I think these kinds of projections are way too rosy ( I would be glad to be wrong ). I do believe there is value in increasing allocation to international, and I may actually do so some day.

Jack FFR1846
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Re: Schwab's market predictions next 10 years

Post by Jack FFR1846 » Wed Jun 13, 2018 7:47 am

I use Schwab as my main taxable account and really like it. But I only read their articles for entertainment purposes. Sort of like laughing at "my brother" jokes on Click and Clack but ignoring their rants about high horsepower to weight ratio cars.

Key Points
1) Market returns on stocks and bonds over the next decade are expected to fall short of historical averages.

2) The main factors behind the lower expectations for asset returns are low inflation, historically low interest rates and elevated equity valuations.

3) International stocks appear more attractive than U.S. stocks based on valuations, underscoring the importance of investing in a diversified portfolio.


So.....

1) Welcome to John Bogle's point from at least a year ago.

2) The reason is because the relative viscosity of blinker fluid squeezed through the phetzer valve gums up the turbo encabulator, necessitating a higher variable reluctance flux resonator.

3) Welcome to a year ago. Chasing where the puck was a looooooong time ago.
Bogle: Smart Beta is stupid

lostdog
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Re: Schwab's market predictions next 10 years

Post by lostdog » Wed Jun 13, 2018 7:48 am

All noise. That's all it is.
Hear the clock ticking? That’s your life flying by while you listen to market pundits and watch stock prices fluctuate. -Humble Dollar

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Toons
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Re: Schwab's market predictions next 10 years

Post by Toons » Wed Jun 13, 2018 7:50 am

Great.
Keep Saving and Investing..


🙈
"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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jeffyscott
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Re: Schwab's market predictions next 10 years

Post by jeffyscott » Wed Jun 13, 2018 7:58 am

It's a 10 year forecast, which is a much more reasonable thing to attempt than trying to predict the next year. So if the linked Vanguard paper was attempting to make a prediction for 2017, that is something they should stop doing.

Schwab is much more optimistic regarding stocks (particularly US) than other sources I have looked at (RA and GMO). I think Vanguard was even more optimistic for US (at least on a relative basis), I don't remember the numbers but I think they had expected returns about equal for US and Foreign.

We have a very low need for withdrawals, so I don't really need to worry about what is safe. I project us having far more than we need even with 1% real returns.

Despite low expected returns for bonds we are at 40% stocks. Already went to 50/50 US/foreign with about 15% EM some time ago. Not planning any further changes, barring significant changes in stock prices.
press on, regardless - John C. Bogle

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Taylor Larimore
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Re: Schwab's market predictions next 10 years

Post by Taylor Larimore » Wed Jun 13, 2018 8:00 am

confusedinvestor wrote:
Wed Jun 13, 2018 1:22 am
Schwab's market forecast. - What do you think about this Schwab article?
I agree with lostdog:
All noise. That's all it is.
Stay-the-course.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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Taylor Larimore
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Re: Schwab's market predictions next 10 years

Post by Taylor Larimore » Wed Jun 13, 2018 8:00 am

confusedinvestor wrote:
Wed Jun 13, 2018 1:22 am
Schwab's market forecast. - What do you think about this Schwab article?
I agree with lostdog:
All noise. That's all it is.
Stay-the-course.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

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nisiprius
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Re: Schwab's market predictions next 10 years

Post by nisiprius » Wed Jun 13, 2018 8:05 am

I don't think people should waste their time on things like this. The chances that you'll remember to check in ten years is small. And selective memory guarantees that we are all have a bias toward remembering successful predictions and forgetting failed ones.

In April of 2014 Bloomberg polled 67 economists on what they expected to happen to the ten-year Treasury rate over the next six months. All 67 of them, 100%, said it would go up, the only question was by how much. It went down.

My favorite Larry Swedroe articles are the ones where he reviews the "sure things." (He uses the phrase tongue-in-cheek. His point is how often, and how quickly, and how badly the "sure thing" forecasts fail). At the beginning of the year he summarizes the universal consensus wisdom, the things that just about everybody in the investment world agrees are sure to happen. Then he checks in during the year with updates and reviews them at the end of the year. Only when you actually do this do you realize how ludicrously unreliable predictions are, even broad, sure-thing consensus predictions and even only a year ahead.

Here's his tabulation:

Image

Just one later, three quarters of the predictions had been proved wrong, and these were not out-on-a-limb things, these were broad consensus "everybody says" agreements.

This is the link to his January article on the supposed "sure things" for 2018.
Annual income twenty pounds, annual expenditure nineteen nineteen and six, result happiness; Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Jeff Albertson
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Re: Schwab's market predictions next 10 years

Post by Jeff Albertson » Wed Jun 13, 2018 8:23 am

"all models are wrong, but some are useful"

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jeffyscott
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Re: Schwab's market predictions next 10 years

Post by jeffyscott » Wed Jun 13, 2018 3:20 pm

nisiprius wrote:
Wed Jun 13, 2018 8:05 am
My favorite Larry Swedroe articles are the ones where he reviews the "sure things." (He uses the phrase tongue-in-cheek. His point is how often, and how quickly, and how badly the "sure thing" forecasts fail). At the beginning of the year he summarizes the universal consensus wisdom, the things that just about everybody in the investment world agrees are sure to happen. Then he checks in during the year with updates and reviews them at the end of the year. Only when you actually do this do you realize how ludicrously unreliable predictions are, even broad, sure-thing consensus predictions and even only a year ahead.
Short term predictions have little in common with estimating long term expected returns. Larry, himself, does the latter.

http://www.etf.com/sections/index-inves ... nopaging=1
press on, regardless - John C. Bogle

WhiteMaxima
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Re: Schwab's market predictions next 10 years

Post by WhiteMaxima » Wed Jun 13, 2018 3:55 pm

For people still in accumulate stage, isn't it nice the train move slower so they could catch on? For people already accumulate enough, a slow train doesn't matter at all.

garlandwhizzer
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Re: Schwab's market predictions next 10 years

Post by garlandwhizzer » Wed Jun 13, 2018 5:17 pm

From Larry's article, "Assessing Expected Returns"
And finally, we’ll look at research by Cliff Asness of AQR Capital. In a November 2012 paper, “An Old Friend: The Stock Market’s Shiller PE,” Asness found that 10-year forward average real returns fall nearly monotonically as starting CAPE 10 P/E ratios increase. He also found that as the starting Shiller CAPE 10 increased, worst-case scenarios get worse and best case scenarios get weaker. He further discovered that while the metric provided valuable insight, there were still very wide dispersions of returns.
Basically this sums up what we do know on the subject: current valuations are the best predictor of average 10 year forward returns. Averages are one thing but as a predictor for a specific time frame like now, far from perfect. There is a wide dispersion of returns around the 10 yr. averages. I think Schwab's guesses in nominal forward returns are reasonable and rationally based, in fact similar to Vanguard's which also suggests lower than historical returns going forward.

Like all guesses about the market's future over the next 10 years they may turn out to wrong in either direction. The question is whether these guesses are actionable. Potential actions might include planing to work longer before retirement, spending less both now and in retirement, investing a greater percentage of ongoing income stream, and/or taking on more portfolio risk with the hope of higher expected returns.

Garland Whizzer

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Re: Schwab's market predictions next 10 years

Post by 2015 » Thu Jun 14, 2018 9:26 am

Taylor Larimore wrote:
Wed Jun 13, 2018 8:00 am
confusedinvestor wrote:
Wed Jun 13, 2018 1:22 am
Schwab's market forecast. - What do you think about this Schwab article?
I agree with lostdog:
All noise. That's all it is.
Stay-the-course.

Best wishes.
Taylor
I disagree. It's more than noise, it's garbage.

May as well be another "article" advertisement from etf.com. Consider such marketing ploys disguised as information at your own peril.

totesmagotes
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Re: Schwab's market predictions next 10 years

Post by totesmagotes » Thu Jun 14, 2018 10:16 am

confusedinvestor wrote:
Wed Jun 13, 2018 1:22 am
Schwab's market forecast -
https://www.schwab.com/resource-center/ ... the-future

What do you think about this Schwab article ?

Typically companies like Vanguard, Schwab, Fidelity are not right on market commentary, outlook.

Vanguard on 2017 outlook as below and we all know what market did on 2017.

https://americas.vanguard.com/docs/lite ... k-2017.pdf

ps: I dont change my savings, investing, AA b/c of such articles, but, would you consider changing your "SWR" rates b/c of such articles ?
I'm sure others have pointed this out, but before wondering if you should consider Schwab's 10-yr forecast starting this year, you need to ask yourself the following: "Why should I trust this forecast? How have their past forecasts verified?" So, how does their 10-yr forecast made in 2008 compare to what has actually transpired in that 2008-2018 stretch?

Tamalak
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Re: Schwab's market predictions next 10 years

Post by Tamalak » Thu Jun 14, 2018 10:20 am

We like to repeat the mantra "nobody knows nothing" but is it such a reach to expect stocks to return less going forward? Systemic risk seems to have gone down, so people are more comfortable being more aggressive in stocks, driving their prices up.

Saying future stocks will return less than past stocks is like saying that bonds will return less than stocks. Since bonds are safer, that seems pretty self-evident.

rec7
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Re: Schwab's market predictions next 10 years

Post by rec7 » Thu Jun 14, 2018 10:21 am

Well at least they don't say 10%-12%
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Re: Schwab's market predictions next 10 years

Post by abuss368 » Thu Jun 14, 2018 7:10 pm

confusedinvestor wrote:
Wed Jun 13, 2018 1:22 am
Schwab's market forecast -
https://www.schwab.com/resource-center/ ... the-future

What do you think about this Schwab article ?

Typically companies like Vanguard, Schwab, Fidelity are not right on market commentary, outlook.

Vanguard on 2017 outlook as below and we all know what market did on 2017.

https://americas.vanguard.com/docs/lite ... k-2017.pdf

ps: I dont change my savings, investing, AA b/c of such articles, but, would you consider changing your "SWR" rates b/c of such articles ?
Hi confusedinvestor -

In my opinion it is all market noise. This should have no impact or influence on an investor's strategies or portfolio.

Stay the course!
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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Re: Schwab's market predictions next 10 years

Post by iamlucky13 » Thu Jun 14, 2018 11:50 pm

jeffyscott wrote:
Wed Jun 13, 2018 7:58 am
It's a 10 year forecast, which is a much more reasonable thing to attempt than trying to predict the next year. So if the linked Vanguard paper was attempting to make a prediction for 2017, that is something they should stop doing.
Not a very firm prediction. Just that inflation would be low, but in the US might hit 2% (2.1% actual), the Fed rate would likely be raised to 1.5% (which it was in December), and that the restrained GDP growth didn't necessarily mean poor stock performance, so they tentatively forecast 5-8% global stock returns (Vanguard Total World + 24.06%).

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