What’s ahead for 2020

The Saratogian (Saratoga, NY) - - NEWS -

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

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