Economics and markets

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September 14, 2021

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Vanguard Global Chief Economist

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Treat history with the respect it deserves

1 Bogle, John C., 2015. Bogle on Mutual Funds: New Perspectives for the Intelligent Investor. Hoboken, N.J.: John Wiley & Sons, Inc.

The value of market forecasts rests on reasonable expectations
Some errors in our forecasts and the lessons they offer
Three line charts show the forecast and realized 10-year annualized returns for, respectively, a 60% stock/40% bond portfolio, U.S. equities, and ex-U.S. equities (all U.S.-dollar denominated). They show that a 60/40 portfolio returned an annualized 7.0% over the 10 years ended September 30, 2020, and that Vanguard’s return  forecasts at the 25th, 50th, and 75th percentiles of Vanguard Capital Markets Model distributions are 2.4%, 3.8%, and 5.2%, respectively. U.S. equities returned an annualized 13.4% over the 10 years ended September 30, 2020. Vanguard’s return forecasts at the 25th, 50th, and 75th percentiles of Vanguard Capital Markets Model distributions are 0.6%, 3.2%, and 5.8%, respectively. Ex-U.S. equities returned an annualized 4.0% over the 10 years ended September 30, 2020. Vanguard’s return forecasts at the 25th, 50th, and 75th percentiles of Vanguard Capital Markets Model distributions are 3.5%, 6.1%, and 8.7%, respectively.
Why today’s valuation expansion limits future U.S. equity returns
What to expect in the decade ahead

2 Jenks, Philip, and Stephen Eckett, 2002. The Global-Investor Book of Investing Rules: Invaluable Advice from 150 Master Investors. Upper Saddle River, N.J.: Prentice Hall PTR.

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