What’s ahead for 2020
Heading into 2020, the mood is much more giddy, but Wall Street is trying to rein in expectations.
Vanguard forecasts U.S. stocks will return 3.5% to 5.5% annually over the coming decade. Even toward the top end of that range, it’s only half what the market has returned historically. Foreign stocks might offer a bit more, at roughly 7.5% annually, but U.S. bonds look set to offer only 2% or 3% annually over the next decade, according to Vanguard.
Of course, any prediction about where investments will end up is only a guess, no matter how educated. Many on Wall Street came into this year expecting only modest returns given all the worries about interest rates and a possible recession. Now, the S&P 500 is about to close out its second-best year of the last two decades.
But for bonds, the reasons for lower expected returns are easy to see. Bonds pay much less in interest than one or 10 years ago. The 10year Treasury now has a yield of 1.93 %, versus 2.82% a year ago and 3.54 % a decade ago. For bonds to return more than their yields, rates will need to drop even lower.
Some banks along Wall Street have relatively healthy