Return expectations - Global Equity, next decade

ChilliBob

Has anyone given this a read?

https://occaminvesting.co.uk/return-expectations-2022-edition/

So, if inflation isn't transitory, it seems investing in global equities will produce less of a real loss than cash, not not a gain. Interesting.

Food for thought certainly! 

Albermarle

Yes interesting, but only what many of the posters on here ( and other sources) have been saying for a while now. That the next ten years will not be as good as the last ten. Forecasts of annual growth between zero and 3% ( after inflation ) seem to be the norm.
The unknown is where inflation will be . If it stays high ( >5% ?) the getting any growth above that will be a struggle I think .
As said in another thread , a lot of people are sitting on very big gains in recent years , so if the next few years are a bit flat then not the end of the world for some . 
 global equities will produce less of a real loss than cash, 
It is possible savings rates will increase to a point that they look attractive , not yet though.

ChilliBob

The forecasts do seem to be quite different to the conventional financial modelling you see from IFAs, or other sites where you talk about assuming x% per year when cash flow forecasting and stuff.

Shame I joined very recently!

I doubt savings will increase that much though, to the point it becomes unattractive to take risk of a global equity fund anyway!

It's interesting what he mentioned about a tilt away from the US because of valuations. A hard one to call that, in one breath you have people keep saying they're sky high, but then they have been for a while, and if you'd dodged them in favour of more reasonable valuations you'd have lost out. 

lozzy1965

Not meant as a criticism of the op, but that is just an opinion.  No one knows for sure until the next ten years have passed us by.  It would be be interesting to see what they were predicting 10 years ago, and whether they were correct or not, but even that wouldn't mean that their predictions are correct this time.

Thrugelmir

ChilliBob said:

The forecasts do seem to be quite different to the conventional financial modelling you see from IFAs, or other sites where you talk about assuming x% per year when cash flow forecasting and stuff.

Probably as the ground rules have only recently started to change. One investment article I read recently described the coming era as the "Great Reset".  There's far too many uncertainties to start to forecast with any degree of accuracy. The one thing that stock markets hate is uncertainty. Uncertainty increases volatility.  Hence why I've said on a few occasions recently active investment management is likely to prevail. There's no longer a one size fits all. An abundance of cheap money in peoples pockets driving all stocks upwards to crazy valuations will progressively fade away. Fundamentals will again matter. Cash generation. Balance Sheet Strength. Etc, etc. Going to be sizable winners and losers. 

ChilliBob

lozzy1965 said:

Not meant as a criticism of the op, but that is just an opinion.  No one knows for sure until the next ten years have passed us by.  It would be be interesting to see what they were predicting 10 years ago, and whether they were correct or not, but even that wouldn't mean that their predictions are correct this time.

Indeed, just an opinion - but collected from a few sources. It's interesting how different they are (which shows how difficult it is to predict!). The author did point out the outlier (I think GMO?) was wildly pessimistic before for example! 

ChilliBob

Thrugelmir said:

ChilliBob said:

The forecasts do seem to be quite different to the conventional financial modelling you see from IFAs, or other sites where you talk about assuming x% per year when cash flow forecasting and stuff.

Probably as the ground rules have only recently started to change. One investment article I read recently described the coming era as the "Great Reset".  There's far too many uncertainties to start to forecast with any degree of accuracy. The one thing that stock markets hate is uncertainty. Uncertainty increases volatility.  Hence why I've said on a few occasions recently active investment management is likely to prevail. There's no longer a one size fits all. An abundance of cheap money in peoples pockets driving all stocks upwards to crazy valuations will progressively fade away. Fundamentals will again matter. Cash generation. Balance Sheet Strength. Etc, etc. Going to be sizable winners and losers. 

Yeah, I guess. I'm just rewinding to about a year or so ago when I had a chat with a few IFAs using the sort of tools they use to forecast how much you'll end up with at 90 and stuff based on returns, inflation, starting pot size, amount you need per year etc. 

I suppose if you're trying to forecast for the next say 50 years you'd need to see how far back you could go and take that average. 11.29% for MSCI World since 1978 is apparently the average, according to https://backtest.curvo.eu/market-index/msci-world  which seems a lot higher than I was expecting. 

Yes, I've read your thoughts, with interest, on active management recently actually. Agreed regarding fundamentals - I'm certainly leaving my allocation to SMT and EWI alone for the time being!

My attempts at active management pics over the last year weren't great - I'd have been better off sticking to a Global Tracker. Essentially, like probably 80% of people, I went a bit too heavy on growth and tech (no, not 100% BG before anyone suggests it lol - rembmber my post on Ishares Clean Energy lol) then got walloped by a rotation into value. 

Albermarle

I suppose if you're trying to forecast for the next say 50 years you'd need to see how far back you could go and take that average. 11.29% for MSCI World since 1978 is apparently the average, according to https://backtest.curvo.eu/market-index/msci-world  which seems a lot higher than I was expecting. 

Only a minority invest 100% equity , so for most people the projections for retirement would not be based on that figure.

My attempts at active management pics over the last year weren't great - I'd have been better off sticking to a Global Tracker.

Less than a year ago I switched one UK fund to a more actively managed one . Partly because some wise heads on here said that UK managed funds often beat the sloth like FTSE 100. The fund has since  performed abysmally .....

You live and learn.

ChilliBob

Yep, I have a decent selection of UK small caps - I went a bit mad on them, they were all ticking along very nicely, seems to have somewhat paused or reversed for now. 

Royal London Global Equity Select seems to be doing alright at the moment. Sadly I opened positions in Royal London Sustainable World not too long ago - it's -15% or so at the moment, however, still feel it's a decent decision for now. 

Not sure I'm brave enough to place big gambles on deep value funds and avoid the US or something else equally specific though.

NannaH

Best not mention the Royal London Sustainable funds 😡
Just goes to show that even careful research and trustnet/morningstar ratings aren’t the most reliable predictors.   I honestly don’t know why I bothered.  

Prism

NannaH said:

Best not mention the Royal London Sustainable funds 😡
Just goes to show that even careful research and trustnet/morningstar ratings aren’t the most reliable predictors.   I honestly don’t know why I bothered.  

I hold one of the RL sustainable funds and its been great. What's up with them?