Vanguard Warns of Worsening Odds for Markets

In short, Vanguard forecasts that the next decade (2020 – 2030) will be far less rosy in the markets than this decade (2010 – 2020).

What do you think? New investors who have only known a bull market? Old timers who have weathered the storms? What’s your take?


via NYT:

The chances of a recession by the end of 2020 are mounting. And the prospects for the American stock market in the next decade have worsened appreciably.

Those are prognoses, not facts. But they’re not just offhand projections, either. They are the sober assessments of Vanguard, the $5 trillion asset management firm. And they suggest that the current good times may amount to a reprieve: an opportunity to make sure that you are prepared for a storm.

Vanguard, known for its caution, emphasizes that this is a general forecast. “We don’t make any actual predictions about where things are going next month or, in the markets, next year,” Greg Davis, the company’s chief investment officer, told me. “The stock market could rise a lot, short-term. We don’t know.”

The United States economy could well turn in another series of strong quarters, with the annualized growth rate of gross domestic product above 4 percent, and the unemployment rate below it. Those are statistics for the second quarter, and just may be surpassed over the next year.

But in the Vanguard view, the odds have increased sharply that more challenging times are coming. It is likely, Vanguard says, that the long stretches of sizzling stock markets since 2009 — bouts that have made investing a winner’s game for those lucky enough to afford a seat at the table — will become much rarer.

Vanguard tracks data to predict the likelihood of a recession at certain points in the future. In recent years, the company has put the probability of a recession six months out at close to 10 percent. Now, Vanguard says the chances of one by late 2020 are between 30 and 40 percent. That’s Vanguard’s highest-ever estimate for that time frame, Mr. Davis said. (A six-month forecast reported a greater than 40 percent probability before the recession that started in December 2007.)


h/t LateralEntry