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Vanguard's 10-Year Forecast

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Re: Vanguard's 10-Year Forecast

          As you stated I read it and it seems a pretty general take. My experience investing tells me we’re due before the next ten years for a long period of doom and gloom. Based on a pattern I observed over a long period.

           1. 1968-1982. Pretty flat  bear market. High inflation. After a decade of social chaos. While the late 40’s and 50’s were very good due to being the only industrialized country still standing as we abandoned farming and became the arsenal of democracy.

            2. 1982-1999. Happy days are here again. Tech boom leading to irrational investing and the tech bust.

             3.  1999- 2009. A series of too close disruptions, an irrational boom in housing speculation ending in the Great Recession.

             4. 2009 - Irrational exuberance and a series of market disruptions. President Tweet really unleashed for a second term or a step towards a Socialist Republic? 

            Anyway I’ll probably end up one with the cosmos after this bull slips away. So as always everyone should keep doing what they’re doing because only the shadow knows. (if your young enough to know what that means). Lol.

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Re: Vanguard's 10-Year Forecast

My prediction for the financial markets: Stocks will probably be higher in ten years than they are now. Interest rates will tend to fluctuate.

My prediction for the weather: In ten years it will either be sunny, cloudy, partly sunny, or partly cloudy -- depending on where you live.

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Re: Vanguard's 10-Year Forecast

Thanks for posting this, Learner.  Vanguard's forecasts are probably about as good as financial forecasts can be (which we all know are inherently difficult). 

I hope that Vanguard's forecast turns out to be not too far wrong.  When I project the forecast on to CREF Stock's R2 class with 70/30 US/foreign allocation and a .35% ER, it comes out to be 5.1%-7.3% nominal return annualized over the next ten years.  I think that a return in that range would be just great, but I won't count on it.

John

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Re: Vanguard's 10-Year Forecast

VG forecast for the next 10 years are as follow

  • U.S. equity returns: 4% – 6%
  • U.S. aggregate bond returns: 2.5% – 4.5%
  • International equities returns: 7.5% – 9.5%
  • International bond returns (hedged): 2% – 4%

The above means that many investors with 40/60 to 70/30 portfolio will get about 4-6% annually.

I think the best Multi bond can make about 4.5-5% annually with much lower SD.  Actually, great CEFs like PDI+PCI have a good chance to beat stocks with similar SD and these CEFs also generate much higher monthly income (at over 8% annually) that many retirees need.

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Re: Vanguard's 10-Year Forecast

The broad measure of stock market forecasters's accuracy is 47%,  less than a coin toss.

In The Fortune Sellers: The Big Business of Buying and Selling Predictions, a book about the folly of any type of predictions -- weather, stock market, the economy, population, etc. -- there is a chapter devoted to stock market forecasters and he shows their dismal records. And there are numerous other well-known books, devoted to stock market forecasting, showing the same results.

The perma-bears look good and are show-cased in bear markets, perma-bulls look good and are show-cased during bull runs, and forecasters in the middle look good when their 47% of being right happens to come true.

The above book was published in 1998, but nothing has changed nor will it. To think otherwise is to be swimming in that famous Egyptian river.

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Re: Vanguard's 10-Year Forecast


@FD1001 wrote:

I think the best Multi bond can make about 4.5-5% annually with much lower SD. 

If you want a low SD, and high Sharpe ratio, it's hard to do better than TREA.  For the past 3 years its SD is .8% and its Sharpe ratio is 5.1.  (See FAQs F2 and F4.)  TREA ought to be good for a nominal return of 5% or better.

John


 

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Re: Vanguard's 10-Year Forecast [TR Equations]

How soon Vanguard forgot the TR equations that Bogle popularized:

%TR = %Dividend_yield + %Dividend_growth + %Change_in_P/D

or 

%TR = %Dividend_yield + %Earnings_growth + %Change_in_P/E

With P/D and P/E elevated, and muted prospects of dividend or earnings growth, the %TR will also be subdued.

 

YBB
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Re: Vanguard's 10-Year Forecast


@Bruzer wrote:

The broad measure of stock market forecasters's accuracy is 47%,  less than a coin toss.

Bruzer, you've stumped me.  I'm trying to think how a coin toss can be used to make predictions of annualized returns.  I can't come up with anything plausible, but I'm guessing that its accuracy would be far less than 47%.

Will Vanguard's 10-year forecast be counted as wrong if US stocks end up increasing by an annualized 3.9% or 6.1%?   I think that I understand Vanguard's reasoning better than forecast graders' methodologies.

John


 

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Re: Vanguard's 10-Year Forecast


@jjustice wrote:

@Bruzer wrote:

The broad measure of stock market forecasters's accuracy is 47%,  less than a coin toss.

Bruzer, you've stumped me.  I'm trying to think how a coin toss can be used to make predictions of annualized returns.  I can't come up with anything plausible, but I'm guessing that its accuracy would be far less than 47%.

Will Vanguard's 10-year forecast be counted as wrong if US stocks end up increasing by an annualized 3.9% or 6.1%?   I think that I understand Vanguard's reasoning better than forecast graders' methodologies.

John


 


 

Did you read the linked article? You will have to in order to understand the "47%". FWIW, all of this is old news, and nothing has changed.

As for generalized, "fuzzy" forecasts, I read them too if I happen to run into them. But I never make changes in my portfolio because of what they may or may not say.

I particularly like to watch Liz Ann Sonders market perspectives -- not because of her generalized commentary, but because she is *SO* easy on the eyes.

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Re: Vanguard's 10-Year Forecast

I read the linked CXO article, but I didn't see any mention of how a coin toss might be used to forecast the stock market, much less how it might do so with better than 47% accuracy.

The CXO people have followed predictions of 68 so-called "stock market gurus."  Vanguard's Capital Markets Model is not listed among the gurus.  There is not a clear account of how the guru's forecasts are evaluated as "accurate" or "inaccurate."

However these evaluations are done, I don't consider the accuracy of a group of 68 individuals who profit in various ways by making various types of market "calls" based on various methods as relevant to whether the Vanguard return forecast deserves attention.  

John

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Re: Vanguard's 10-Year Forecast


@jjustice wrote:

I read the linked CXO article, but I didn't see any mention of how a coin toss might be used to forecast the stock market, much less how it might do so with better than 47% accuracy.


They didn't say that.

What they did say, and you must have missed this, is that the forecasters' accuracy was about 47% -- less than a coin toss which is 50/50. But as I already said, none of this is news.

Do you adjust your portfolio depending on Vanguard's forecasts?

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Re: Vanguard's 10-Year Forecast


@jjustice wrote:

@FD1001 wrote:

I think the best Multi bond can make about 4.5-5% annually with much lower SD. 

If you want a low SD, and high Sharpe ratio, it's hard to do better than TREA.  For the past 3 years its SD is .8% and its Sharpe ratio is 5.1.  (See FAQs F2 and F4.)  TREA ought to be good for a nominal return of 5% or better.

John


 


Where is the link?

TREA is not available for many including me

TREA is based on the last several years which had muted volatility.  Be sure to get out when 2008 will happen again.

YBB, what is the ticker on M*, QREARX?

 

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Re: Vanguard's 10-Year Forecast

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Re: Vanguard's 10-Year Forecast

FD,

These are the eligibility criteria to get at TREA (just in case you are interested).

https://www.tiaa.org/public/pdf/advisors/resources/eligibility-guide/eligibility-guide.pdf

Bob

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