Tags: Ibbotson | returns | 10% | past

Experts: 10% Returns Are a Thing of the Past

Tuesday, 06 Nov 2012 11:24 AM

By Dan Weil


For years investors have taken comfort in research showing that stocks historically have returned about 10 percent a year.

But many experts say you can now forget that notion, including Roger Ibbotson, a Yale business school professor who did some of the seminal research on historical returns.

“Starting in 1926, the return on the large-cap market has been 9.8 percent, but this was during a period when inflation rates are higher than they are today, and risk-less rates [Treasury yields] were higher than they are today,” he tells MarketWatch.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

As a result, you have to take a couple percentage points off annual returns, “because we really are in a risk-less rate environment where the rates are close to zero.”

For at least the next 25 years, Ibbotson doesn’t see stocks returning more than 8 percent a year. “But that’s not bad,” he points out. “That’s a great return.”

Vanguard Group founder Jack Bogle anticipates stock returns of 6 to 8 percent going forward. He too told MarketWatch that puny yields and inflation will limit returns.

Whatever the market’s path, it may be affected little by Tuesday’s election outcome.

"Since 1976, the S&P 500 has offered approximately 10 percent total returns in the 12 months following a presidential election, regardless of which party wins that election,” Goldman Sachs Chief Equity Strategist David Kostin writes in a report obtained by Business Insider.

Editor's Note: Economist Warns: 50% Unemployment, 100% Inflation Possible

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