Whither the Future of Returns?

It's been almost 8 years since the Lehman collapse triggered the Great Recession. Who would have thought that at this point we would see negative interest rates on government bonds over the horizon, both East and West? Who would imagine, in the midst of the longest economic recovery albeit the weakest, that we would see 10 year US Treasury yields hovering in the 1.50% range? And all of this in the midst of massive monetary stimulus, dramatic central bank balance sheet growth, and a fiscal policy debate that is, well, non-existent.

I'm not qualified to expand upon those topics beyond my own readings and my own opinions. But I do live, sleep and breath investment analysis on a daily basis. The search for safety of principal, nominal yield and a sense of direction dominate conversation. We live in a time of distorted markets that make planning for the future difficult.

 

Seven year forecast on major asset classes. 

Seven year forecast on major asset classes. 

Looking at the seven year forecast for returns on major asset classes, we see a bleak outlook where NO major asset classes reach the 6.50% long-term historical US equity return. I do not believe that the traditional capital markets, as engaged over the last 30 years, will serve investors well over the next decade. I believe more active, tactical management of capital markets assets will be required, and that the inclusion of sensible, opportunistic alternatives will provide the returns necessary to support spending goals for individuals and organizations alike. I also believe that sensible allocations to income producing real property will help provide higher yields and hedge against the threat of inflation given massive monetary stimulus.

This is new economic territory for all of the world's actors. This is the backdrop against which we have and continue to apply The Opportunity Map for success.