Expert perspective

In market-forecasting, longer horizons help

January 24, 2023

Kevin DiCiurcio

Head of Vanguard Capital Markets Model® Development

A chart shows Wall Street analysts’ forecasts of one-year price returns for the U.S. stock market, as represented by the S&P 500 Index, for the calendar years 2011 through 2022. For each year, the chart displays the highest, lowest, and median forecasts, and the actual market return. Seventy-five percent of the time, the actual price return fell outside the high-low range of forecasts. Specifically, the actual return was lower than the lowest forecast in 2011, 2015, 2018, and 2022 and exceeded the highest forecast in 2013, 2014, 2017, 2020, and 2021.
A line graph shows the rolling 10-year annualized return of a hypothetical portfolio invested 60 percent in stocks and 40 percent in bonds for periods ended between 2011 and 2022, as well as our range of expectations. The returns fluctuated between a little more than 4% and about 9% and remained mostly in the expected range. As of September 30, 2022, the return stood at 5.5 percent. For most of the decade to come, we expect returns for this portfolio to ease toward 4 percent before rising late in the period. Ten years from now, we expect a 10-year annualized return of about 4 percent to 8 percent, with a forecast media of about 6 percent.
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