30-year Market Forecast

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consinv
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30-year Market Forecast

Post by consinv »

I am working on creating a portfolio/asset allocation for myself. I am reading the The Bogleheads' Guide to Investment. In it, it mentions Richard Ferri's 30-year market forecast. Do we have such a table for 2021 anywhere?
000
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Re: 30-year Market Forecast

Post by 000 »

For what are you hoping to use a forecast?
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consinv
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Re: 30-year Market Forecast

Post by consinv »

To estimate future returns
02nz
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Re: 30-year Market Forecast

Post by 02nz »

consinv wrote: Thu Dec 30, 2021 9:00 pm To estimate future returns
My crystal ball says 6.72% CAGR.

(Of course I just pulled that out of ... somewhere, but it's as good as guess as Rick Ferri's, Vanguard's, or anybody else's.)
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consinv
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Re: 30-year Market Forecast

Post by consinv »

Thanks. In the book, there is a table for the year 2005. It has different estimates for different types of asset classes/categories. Maybe we don't that kind of crystal balling anymore ...
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mas
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Re: 30-year Market Forecast

Post by mas »

Vanguard periodically updates this forecast: https://advisors.vanguard.com/insights/ ... cember2021

Don't take it too seriously.
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consinv
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Re: 30-year Market Forecast

Post by consinv »

mas wrote: Thu Dec 30, 2021 9:18 pm Vanguard periodically updates this forecast: https://advisors.vanguard.com/insights/ ... cember2021

Don't take it too seriously.
Thank you. I will use it as a place to start.
BernardShakey
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Re: 30-year Market Forecast

Post by BernardShakey »

mas wrote: Thu Dec 30, 2021 9:18 pm Vanguard periodically updates this forecast: https://advisors.vanguard.com/insights/ ... cember2021

Don't take it too seriously.
Anyone go back and see how close Vanguard's predictions are year-to-year ?
An important key to investing is having a well-calibrated sense of your future regret.
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mas
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Re: 30-year Market Forecast

Post by mas »

BernardShakey wrote: Thu Dec 30, 2021 9:24 pm Anyone go back and see how close Vanguard's predictions are year-to-year ?
These are 10 yr forecasts, so you'd need to find their 10 year old version.
000
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Re: 30-year Market Forecast

Post by 000 »

I don't think any 30 year forecast is reliable enough to be actionable for investing, whether of passive or active style.

To me it makes more sense to pick an asset allocation based on controlling risk to an appropriate level one can tolerate.
Zeno
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Re: 30-year Market Forecast

Post by Zeno »

BernardShakey wrote: Thu Dec 30, 2021 9:24 pm
mas wrote: Thu Dec 30, 2021 9:18 pm Vanguard periodically updates this forecast: https://advisors.vanguard.com/insights/ ... cember2021

Don't take it too seriously.
Anyone go back and see how close Vanguard's predictions are year-to-year ?
This thread may be helpful: viewtopic.php?t=348935
vtsnowdin
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Re: 30-year Market Forecast

Post by vtsnowdin »

According to Bogle in his 'Common sense investing' page 10 the average return of the market was 9.5 percent including dividends from 1900 to 2010.
Guessing a 30 year return going forward more then that would have to find something that has improved business conditions or reduces drags on the systems they endure. I do not see anything of that like and present conditions caution me to not expect even that 9.5 rate.
For planning purposes maybe a 7.0 percent rate or even less might be closer to the mark when it comes to pass.
Just my WAQ.
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JoMoney
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Re: 30-year Market Forecast

Post by JoMoney »

BlackRock has an "Asset return expectations and uncertainty" page that will adjust out to 30 years based on their assumptions/model:
https://www.blackrock.com/institutions/ ... ssumptions
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consinv
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Re: 30-year Market Forecast

Post by consinv »

JoMoney wrote: Thu Dec 30, 2021 9:55 pm BlackRock has an "Asset return expectations and uncertainty" page that will adjust out to 30 years based on their assumptions/model:
https://www.blackrock.com/institutions/ ... ssumptions
Thank you!
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Re: 30-year Market Forecast

Post by arcticpineapplecorp. »

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bog007
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Re: 30-year Market Forecast

Post by bog007 »

I've got a 1 day forecast. Up +140 dow jones on friday. See if I'm right. 30 year forecast. I'll pass
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Re: 30-year Market Forecast

Post by UpperNwGuy »

bog007 wrote: Fri Dec 31, 2021 3:32 am I've got a 1 day forecast. Up +140 dow jones on friday. See if I'm right. 30 year forecast. I'll pass
I thought Fridays were usually down days.
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Re: 30-year Market Forecast

Post by chipperd »

consinv wrote: Thu Dec 30, 2021 9:00 pm To estimate future returns
Unless you can also accurately forecast inflation for the next 30 years I'm not sure how any one can get close to finding out what real returns will be.
I use 1% real returns with a 40/20/20 portfolio for our forecasting, but we are FI and work PT for the social/brain activity.
I also know that forecasting is little more than a parlor game, so I don't take it (or myself and planning) to seriously.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
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Aptenodytes
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Re: 30-year Market Forecast

Post by Aptenodytes »

chipperd wrote: Fri Dec 31, 2021 5:44 am Unless you can also accurately forecast inflation for the next 30 years I'm not sure how any one can get close to finding out what real returns will be.
I've always done all my portfolio projections in real, i.e. inflation-adjusted, terms. Simba's spreadsheet includes both nominal and real data & calculations so it is easy to do. Projecting real returns is enough of a leap of faith already - having to project both nominal returns and inflation rates is just too much for me. More important, I don't need it - what I care about is what my future portfolio might be able to let me spend. Real projections not only do that, but they do it better because they are denominated in terms that have intuitive meaning to me. That is, I have an intuitive understanding of what $10,000 per month in 2021 dollars might buy me 30 years from now, without having to do any math. But if I were projecting in nominal terms and used the Fed's 30-year inflation projection, instead of talking about $10,000 in today's dollars I'd be talking about more like $18,000 in 2051 dollars. The only way I can make sense of what $18,000 in 2051 means to me is to convert it to today's dollars, so why not just keep everything in real terms to start with.

I could kind of see a logic for projecting in nominal terms if you wanted to customize your own personal inflation futures. E.g. if you own your home free-and-clear then the housing component of the CPI doesn't matter to you so much; or if you don't drive much the fuel component doesn't matter so much; if you travel a lot airfare and hotel components matters more, etc. Even in this case, though, I find it easier to project everything in real terms and incorporate disproportionately-important price futures into my spending projections. At present I do that for health care spending but nothing else.
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consinv
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Re: 30-year Market Forecast

Post by consinv »

chipperd wrote: Fri Dec 31, 2021 5:44 am
consinv wrote: Thu Dec 30, 2021 9:00 pm To estimate future returns
Unless you can also accurately forecast inflation for the next 30 years I'm not sure how any one can get close to finding out what real returns will be.
I use 1% real returns with a 40/20/20 portfolio for our forecasting, but we are FI and work PT for the social/brain activity.
I also know that forecasting is little more than a parlor game, so I don't take it (or myself and planning) to seriously.
I agree that inflation needs to be accounted for, otherwise it is not real. 1% seems super conservative but I'd rather be conservative than not.
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princetontiger
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Re: 30-year Market Forecast

Post by princetontiger »

Use 7%.

That's the figure since 1900. However, it's safe to use 9%, since that's the figure post-1971.
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burritoLover
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Re: 30-year Market Forecast

Post by burritoLover »

Surprised Rick Ferri would make forecasts like that - seems out of character
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chipperd
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Re: 30-year Market Forecast

Post by chipperd »

Aptenodytes wrote: Fri Dec 31, 2021 1:11 pm
chipperd wrote: Fri Dec 31, 2021 5:44 am Unless you can also accurately forecast inflation for the next 30 years I'm not sure how any one can get close to finding out what real returns will be.
I've always done all my portfolio projections in real, i.e. inflation-adjusted, terms. Simba's spreadsheet includes both nominal and real data & calculations so it is easy to do. Projecting real returns is enough of a leap of faith already - having to project both nominal returns and inflation rates is just too much for me. More important, I don't need it - what I care about is what my future portfolio might be able to let me spend. Real projections not only do that, but they do it better because they are denominated in terms that have intuitive meaning to me. That is, I have an intuitive understanding of what $10,000 per month in 2021 dollars might buy me 30 years from now, without having to do any math. But if I were projecting in nominal terms and used the Fed's 30-year inflation projection, instead of talking about $10,000 in today's dollars I'd be talking about more like $18,000 in 2051 dollars. The only way I can make sense of what $18,000 in 2051 means to me is to convert it to today's dollars, so why not just keep everything in real terms to start with.

I could kind of see a logic for projecting in nominal terms if you wanted to customize your own personal inflation futures. E.g. if you own your home free-and-clear then the housing component of the CPI doesn't matter to you so much; or if you don't drive much the fuel component doesn't matter so much; if you travel a lot airfare and hotel components matters more, etc. Even in this case, though, I find it easier to project everything in real terms and incorporate disproportionately-important price futures into my spending projections. At present I do that for health care spending but nothing else.
Yup. It's called "real returns" for a reason.
:sharebeer
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chipperd
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Re: 30-year Market Forecast

Post by chipperd »

consinv wrote: Fri Dec 31, 2021 2:03 pm
chipperd wrote: Fri Dec 31, 2021 5:44 am
consinv wrote: Thu Dec 30, 2021 9:00 pm To estimate future returns
Unless you can also accurately forecast inflation for the next 30 years I'm not sure how any one can get close to finding out what real returns will be.
I use 1% real returns with a 40/20/20 portfolio for our forecasting, but we are FI and work PT for the social/brain activity.
I also know that forecasting is little more than a parlor game, so I don't take it (or myself and planning) to seriously.
I agree that inflation needs to be accounted for, otherwise it is not real. 1% seems super conservative but I'd rather be conservative than not.
Yeah, I agree 1% is probably to conservative but becoming FI a bit earlier than expected and coasting has me a bit jitterish, so I use a conservative number to map our approx. 45 year plan.
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
000
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Re: 30-year Market Forecast

Post by 000 »

princetontiger wrote: Fri Dec 31, 2021 2:04 pm Use 7%.

That's the figure since 1900. However, it's safe to use 9%, since that's the figure post-1971.
Did you just stumble out of a comedy club? :mrgreen:
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Re: 30-year Market Forecast

Post by Outer Marker »

mas wrote: Thu Dec 30, 2021 9:18 pm Vanguard periodically updates this forecast: https://advisors.vanguard.com/insights/ ... cember2021

Don't take it too seriously.
I'd not seen this forecast before. Thanks for posting it. I won't take it too seriously. Those are some pretty grim numbers. I'd be very disappointed to see U.S. equities return 2.3-4.3% over the next ten years. Hope they are wrong!

Equities Return projection Median volatility
U.S. equities 2.3%–4.3% 16.7%
U.S. value 3.1%–5.1% 19.2%
U.S. growth –0.9%–1.1% 17.5%
U.S. large-cap 2.2%–4.2% 16.3%
U.S. small-cap 2.2%–4.2% 22.5%
U.S. real estate investment trusts 1.9%–3.9% 19.1%
Global equities ex-U.S. (unhedged) 5.2%–7.2% 18.4%
Global ex-U.S. developed markets equities (unhedged) 5.3%–7.3% 16.4%
Emerging markets equities (unhedged) 4.2%–6.2% 26.8%
am
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Re: 30-year Market Forecast

Post by am »

What’s the point of these forecasts when they are almost always wildly innacurate? How can these forecasts be used in any way that will help?
inbox788
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Re: 30-year Market Forecast

Post by inbox788 »

000 wrote: Fri Dec 31, 2021 6:30 pm
princetontiger wrote: Fri Dec 31, 2021 2:04 pm Use 7%.

That's the figure since 1900. However, it's safe to use 9%, since that's the figure post-1971.
Did you just stumble out of a comedy club? :mrgreen:
post 2009, you can use 1x%, and post 202x, think about 2x%

Are we (US or world) getting more or less productive since 1971?

We used to talk about "moving mountains" and that wasn't challenging enough for the folks trying to move asteroids. What next, moons and planets? We can fix global warming by moving the earth away from the sun, just not too far.

Or you can use 7% and reversion to the mean so 5% going forward after some 9% years. Pick your poison.

Just remember, the graph above is "normal range", and I don't think these are normal times we're in.
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princetontiger
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Re: 30-year Market Forecast

Post by princetontiger »

1971 is the year the gold standard ended and fiat started.

Since 2008, the governments have learned not to have any restraint. Between 1971 and 2008, fiat was treated delicately (like gold).

I think using 9% is a very fine number going forward. Fiat, unlike gold, isn't fixed.

In other words: the governments are now unable to raise rates higher than inflation. That dictates my future outlook of holding a 100% stock/real estate portfolio.
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Re: 30-year Market Forecast

Post by Kelly »

BernardShakey wrote: Thu Dec 30, 2021 9:24 pm
mas wrote: Thu Dec 30, 2021 9:18 pm Vanguard periodically updates this forecast: https://advisors.vanguard.com/insights/ ... cember2021

Don't take it too seriously.
Anyone go back and see how close Vanguard's predictions are year-to-year ?

Their latest Outlook has this comparison
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