Morningstar Survey Results for Long-Term Stock and Bond Returns

A recent Morningstar article outlined the intermediate-term (10-year) market return assumptions of a group of industry leaders that responded to a recent survey:

John Bogle, founder of Vanguard: 4% stock return, 3% bond return over the next 10 years. Bogle asserts that “future returns from the major asset classes will be muted.

GMO: -4.4% returns for U.S. large caps over next seven years; 2% real returns for emerging market equities. The firm, the article points out, is generally pessimistic. “For GMO,” it says, “emerging markets equities are the sole bright spot on the horizon for stocks.”

Morningstar Investment Management: 1.8% return for U.S. stocks; 2.5% for U.S. bonds (both 10-year nominal). In general, the firm has low expectations for U.S. stocks and bonds, but the outlook is more optimistic for foreign equities.

Research Affiliates: 0.3% return for U.S. large caps over next 10 years; 0.8% for U.S. bonds (using Barclays U.S. Aggregate Bond Index as benchmark). According to the article, “the firm’s recent 10-year risk/return expectations…suggest that investors who are inclined to stick with a plain-vanilla U.S. stock/bond portfolio should curb their enthusiasm,” adding that a 60/40 stock/bond portfolio will “barely break into the black on an inflation-adjusted basis over the next decade.”

Charles Schwab Investment Advisory: 6.7% return on U.S. large-caps (between 2017 and 2026); 3.1% return from U.S. investment grade bonds. The firm expects higher returns than many others in the Morningstar survey, according to the article, which added that its expectations for foreign equities “wasn’t appreciably better than for U.S. stocks.”

Vanguard: U.S. equity returns in the 3% to 5% range during the next decade; 5.5% to 7.5% for non-U.S. equities; 2% to 3% returns for global fixed-income markets. In its survey response, Vanguard stated, “Elevated valuations, low volatility, and secularly low bond yields are unlikely to be allies for robust financial markets over the next five years.” Overall, the firm sees brighter prospects for foreign than for U.S. equities, and describes its outlook for global fixed-income assets as “positive but muted,” according to the article.