Your Survival Guy is not in the predictions business. Are stock prices elevated today? Are they about to take off? If you’re investing for margin of safety, and focused on your return of assets rather than on your return on assets, you’re not watching prices, hoping to sell to a “greater fool,” down the line. At MoneyTalk News, Chris Kissell discusses a recent report on the state of the stock market, writing:
If your retirement account balance has swelled in the past couple of years, you are not alone.
Taken together, 2023 and 2024 represent the best back-to-back years for the S&P 500 stock market index since the late 1990s.
But as you celebrate your good fortune this New Year’s holiday and dream of even bigger gains in 2025, Vanguard Investments offers a sobering prediction: The party might be about to end.
Using its Vanguard Capital Markets Model, the company is predicting an annualized nominal return of just 2.8% to 4.8% for U.S. stocks over the next 10 years.
That is well below the long-term stock market average and even lags Vanguard’s forecast for U.S. aggregate bond returns, which the company pegs at between 4.3% and 5.3%.
Vanguard acknowledges that “more extreme returns are possible.” Still, its forecast is unlikely to please investors who saw the S&P rise 26.06% in 2023 and who are looking at a gain of a similar size in 2024.
Vanguard believes U.S. equity valuations today are “elevated,” although “not as stretched as traditional metrics imply.”
The company notes that U.S. markets could be in a period like the mid-1990s, when stocks were in the middle of a massive and sustained rise. Or — more ominously — stocks could be in a position similar to 1999, when returns were about to fall into a three-year tailspin.
Action Line: What does that mean in plain-speak? It means no one can tell the future. Rather than attempting to guess what will happen, it’s best to have a plan you feel comfortable with no matter what happens. When you want to talk about building your own investment plan, email me at ejsmith@yoursurvivalguy.com. In the meantime, click here to subscribe to my free monthly Survive & Thrive letter.
