Friday, April 29, 2016

Will Investment Returns Be Below Historical Norms

The link and graphic is to Bloomberg and a McKinsey Study.

We will be hearing more of this pessimism over the near term. The negative thinking centers on assumptions that: 1) Corporate profits having peaked; 2) Global growth will slow; 3) Interest rates will continue to be low.

In addition to the short term fluctuations in market sentiment (fear vs greed) one must also consider that there are cycles in long term market sentiment.

In my humble opinion, it is unwise to accept the assumptions in this article as having a 100% probability. My assessment is that they have a more than 50% probability of being very wrong.

Perhaps the biggest factor will be the assumption regarding global growth. While the rate may temporarily slow as excess capacity is absorbed in the short term; over the long term, the substantially growing "middle class" in developing countries has not yet come even close to the consumption levels of the average American. Energy, Health Care and Communication have potential future growth rates substantially higher than we have ever seen in the past.

Be cautiously optimistic in the long term.

Long Term Investment Returns Troubling?

No comments: