Forecasting. Something that people love to do is forecast returns. Well I want to give a little perspective on forecasting based on the latest Vanguard ten-year forecasting plan or their outlook. And they take the fifth percentile, 25th percentile, 50th percentile, 75th and 95th percentile. So their forecast in the ten years ahead are that US equities are going to average 3.8% based on the 50th percentile, and foreign equities will average 7.9% over the next ten years. To give you a little perspective on this, if we go back ten years to 2013, they had forecasted US equities to average 7.7% and foreign equities to average 8.5%. Well, let’s go back and look at the data. Look at the facts from the decade of that forecast. In 2013, the total stock market in the US averaged 11.4%, besting the estimate by 3.7% a year. The foreign markets earned 4.1%, falling short of the midway point by 4.4%. So yeah, it’s within the 25th to 75th percentile standard deviation range. Sorry for the technicals, but you don’t want to use it for precision.
The last stat to give you is that currently we’re in the 98th percentile of historic valuations for large growth companies and in the bottom 2% of valuations for large-value companies. So it’s not a forecast, it’s just stats. So you can take stats to be able to stack the odds in your favor or lean in the direction, but don’t take them as fact on your path to wisdom, wealth, and wellness. Have a great day! https://Satovsky.com
