Tempered expectations

With the stock market hitting new highs, it’s a good time to assess what can be expected for market returns going forward. 

I think a reasonable range of annualized returns on the S&P 500 over the next 5 years is -7% to 12%, with a mid-point around 3%.

That isn’t the high returns that most expect, but that’s much more likely what they will get.

That assumes 4% to 8% underlying growth in earnings, 2% dividend yields growing at that same 4-8% growth rate, and price to earnings ratios of 12x to 25x.

If you think double-digit returns are to be expected, then it may be time to temper your expectations.

Nothing in this blog should be considered investment, financial, tax, or legal advice. The opinions, estimates and projections contained herein are subject to change without notice. Information throughout this blog has been obtained from sources believed to be accurate and reliable, but such accuracy cannot be guaranteed.

Tempered expectations