In this episode of the Power of Zero Show, David McKnight looks at headlines, such as those from Vanguard, BlackRock or Morningstar, that have predicted a dismal forecast for stock market returns over the next decade.

Since such articles predict 4-5% annual growth for the next decade, many investors are pondering whether they should take some chips off the table.

Back in 2015, those same institutions and companies stressed that valuations were too high and that, since the markets had a great run, it couldn’t possibly continue anymore.

Vanguard forecasted 4-6% returns, BlackRock predicted 4.5-5% returns, while Research Affiliates predicted an anemic 1.5-2% returns.

However, from 2015 through 2024, the S&P 500 posted a Compound Annual Growth Rate (CAGR) of roughly 11.9% - proving those predictions wrong!

In fact, such forecasts by stock market research institutions turned out to be off by 5-6%. 

David believes that financial institutions making failed predictions about the future of the stock market isn’t just the exception, it’s the rule.

In the 2015-2024 timespan, we had a global pandemic that shut down entire economies, interest rates fell to zero, then spiked in record time, massive government stimulus, a tech boom, a crypto craze, and the rise of AI. - How many of those events could have been predicted in 2015?

David doesn’t recommend putting too much stock in long-term market forecasts by large financial institutions because, even if they might be well-researched, they’re still guesses.

For David, you shouldn’t let fear drive your investment behavior. Not only should you stay invested over the next 10 years, but you should focus on investing inside tax-free accounts.

Think about a balanced, comprehensive tax-fee approach that takes advantage of every nook and cranny in the IRS tax code. 

David refers to tools such as Roth IRAs, Roth 401(k)s, and some properly structured cash value life insurance policies like Indexed Universal Life.

What drives long-term stock market returns? “It isn’t predictions, emotions, or headlines, it’s innovation and productivity. If you look around, you can see that those things are accelerating, not slowing down,” says David.

 

 

Mentioned in this episode:

David’s national bestselling book: The Guru Gap: How America’s Financial Gurus Are Leading You Astray, and How to Get Back on Track

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free video series)

@mcknightandco on Twitter 

@davidcmcknight on Instagram

David McKnight on YouTube

Get David's Tax-free Tool Kit at taxfreetoolkit.com

Vanguard

BlackRock

Morningstar

Research Affiliates

S&P 500

Warren Buffett