Return expectations - Global Equity, next decade

Linton

BrockStoker said:

Thrugelmir said:

@BrockStoker  "US growth stocks have performed consistently over the long term, and I see no reason why that shouldn't continue"

What time frame are you referring too? 

Which US stocks are top of your growth list? 

The last 30 years at least, and I think it makes sense to compare over the near term time frame rather than the longer term time frame as the further back you go, the more the consumer dynamic moves away from what we have today. In particular tech has intertwined itself into everyday life in a way that is hard to separate humanity from tech today, and it's as important to us today as is food and healthcare for example. Indeed, without the tech, there would be no food or healthcare, at least as we know it.

Top of my own growth list? It would have to be the disruptive tech stocks which I think are set to take market share from existing players (stocks like ARWR, and AMRS which I own), but also many established disruptors like the Apples and Microsofts of this world, as long as they keep innovating in order to find new ways to bring in revenue. No harm in having some more blue-chip/consumer staples stocks as well to help smooth the ride, if that suits. I prefer a slightly more aggressive approach!

Just go back 20 or so years.  in September 2000 the S&P500 peaked at arournd 1460.  It did not return to that value until just before the Great Crash peaking at around 1500 in 2007. which it did not exceed until 2013.  In the same period Woodford's Invesco UK Equity Income Fund more than trebled in value.

So the outperformance of US Growth is hardly long term. Even if you include the reltively low dividends, during the 2000's US performance was mediocre at best.

jamei305

There are plenty of decade-old 10-year forward projections to look at e.g.

https://fairwaywealth.com/wp-content/uploads/Vanguard-Research-11-30-2014.pdf

Alexland

jamei305 said:

There are plenty of decade-old 10-year forward projections to look at e.g.

The problem with 10 year capital market models is they tend to be generally right on the sanity of current market valuations but they don't know where we will be in the boom or bust cycle in 10 years time. Will the market valuations be euphoric or in the doldrums? That would make a big difference to annualised returns so without knowing this the best the models can do is assume reversion to the mean to assume a perfectly valued utopian market in 10 years which rarely happens and therefore they tend to be wrong most of the time. The best we can really say is that current valuations tend to have an influence on long term returns.

BrockStoker

Thrugelmir said:

BrockStoker said:

Thrugelmir said:

@BrockStoker  "US growth stocks have performed consistently over the long term, and I see no reason why that shouldn't continue"

What time frame are you referring too? 

Which US stocks are top of your growth list? 

The last 30 years at least, and I think it makes sense to compare over the near term time frame rather than the longer term time frame as the further back you go, the more the consumer dynamic moves away from what we have today. 

Out of curiosity I pulled up the SP500 for 1992.  In descending order the largest companies in the index were

Exxon
General Electric
Wal Mart
AT&T
Philip Morris
Coca Cola
Merck
Royal Dutch Shell
Procter & Gamble
Bristol Myers Squibb

Not an era for high growth companies. More monopolies. That eventually all had their day at the top of the tree, . 

Interesting to see the top ten from back then, although what's there does not surprise me. They are the kind of companies I was referring to towards the end of my previous post. It is the FANGS that have started taking the top spots in the more recent past. I'd certainly have preferred to have put 10K into the FANGS 10 or 20 years back, than in the above top ten you listed, but I can also see the argument for holding them too.

BrockStoker

Linton said:

BrockStoker said:

Thrugelmir said:

@BrockStoker  "US growth stocks have performed consistently over the long term, and I see no reason why that shouldn't continue"

What time frame are you referring too? 

Which US stocks are top of your growth list? 

The last 30 years at least, and I think it makes sense to compare over the near term time frame rather than the longer term time frame as the further back you go, the more the consumer dynamic moves away from what we have today. In particular tech has intertwined itself into everyday life in a way that is hard to separate humanity from tech today, and it's as important to us today as is food and healthcare for example. Indeed, without the tech, there would be no food or healthcare, at least as we know it.

Top of my own growth list? It would have to be the disruptive tech stocks which I think are set to take market share from existing players (stocks like ARWR, and AMRS which I own), but also many established disruptors like the Apples and Microsofts of this world, as long as they keep innovating in order to find new ways to bring in revenue. No harm in having some more blue-chip/consumer staples stocks as well to help smooth the ride, if that suits. I prefer a slightly more aggressive approach!

Just go back 20 or so years.  in September 2000 the S&P500 peaked at arournd 1460.  It did not return to that value until just before the Great Crash peaking at around 1500 in 2007. which it did not exceed until 2013.  In the same period Woodford's Invesco UK Equity Income Fund more than trebled in value.

So the outperformance of US Growth is hardly long term. Even if you include the reltively low dividends, during the 2000's US performance was mediocre at best.

Points taken. Nevertheless the S&P500 has grown investors money over the years/decades, and made new highs in very recent times. Investors buying the dips would have done even better. On the other hand choosing a retail fund like the Woodford fund can also be a gamble. Good reason to spread investments over a few funds I think.

Filo25

ChilliBob said:

Thrugelmir said:

ChilliBob said:

See that's the thing, a year ago people were warning about the US valuations, so, you decided to reduce the weight of them... To your detriment, I foujd myself doing the same - both then and now. Half heartily back then - I chose some Majedie fund with a lower US exposure, and a bunch of UK small caps. The Majedie has been a bit of a flop. I did consider a European and Asian tracker this morning to compliment the global but I didn't do anything in the end! 

Might as well hold a multi asset fund and let the investment managers progressively rotate the exposure as they think fit.  There's been a negative mantra towards the UK markets for a long time. Over the past 3 months you'd be in positive territory with UK exposure while US markets have turned negative. Shifts don't have to be seismic.  Soon there'll be threads pronouncing the benefits of holding UK shares again. Much of the best return on offer will already have been taken. 

I do still hold all those UK small caps, I still believe in it as a sector full stop. Stuff like Marlborough nano and micro are sitting on a loss for me, but I intend to hold them for a while. From what I can see the UK stuff doing well at the moment is the much ridiculed ftse 100 and similar, which besides accidental exposure I have no direction exposure too.

Still holding a position in HRI but its taken a pummelling soon, again, I don't intend to sell it soon, but it's also not a life changing allocation or percentage 

I viewed the FTSE 100 as practically uninvestable for a fair while myself, but if you think the market conditions of more significant inflation and rising rates are here for a while, its a lot more interesting than many major indices, you could hold a lot worse than lots of banks, miners and oil/gas producers in that kind of environment.

Obviously no certainty on that macroeconomic outlook but it looks a bigger risk than it has for a long while. 

GeoffTF

Thrugelmir said:

BrockStoker said:

Thrugelmir said:

@BrockStoker  "US growth stocks have performed consistently over the long term, and I see no reason why that shouldn't continue"

What time frame are you referring too? 

Which US stocks are top of your growth list? 

The last 30 years at least, and I think it makes sense to compare over the near term time frame rather than the longer term time frame as the further back you go, the more the consumer dynamic moves away from what we have today. 

Out of curiosity I pulled up the SP500 for 1992.  In descending order the largest companies in the index were

Exxon
General Electric
Wal Mart
AT&T
Philip Morris
Coca Cola
Merck
Royal Dutch Shell
Procter & Gamble
Bristol Myers Squibb

Not an era for high growth companies. More monopolies. That eventually all had their day at the top of the tree, . 

From Google: S&P 500 on 20 Dec 91 387.04 and 4417.44 on 11 Feb 22. That is a growth of more than 11 times. You would have either already own all the future growth stocks, or would have owned them as soon as they entered the index. A tiny percentage of active funds would have beaten that.

ChilliBob

Filo25 said:

ChilliBob said:

Thrugelmir said:

ChilliBob said:

See that's the thing, a year ago people were warning about the US valuations, so, you decided to reduce the weight of them... To your detriment, I foujd myself doing the same - both then and now. Half heartily back then - I chose some Majedie fund with a lower US exposure, and a bunch of UK small caps. The Majedie has been a bit of a flop. I did consider a European and Asian tracker this morning to compliment the global but I didn't do anything in the end! 

Might as well hold a multi asset fund and let the investment managers progressively rotate the exposure as they think fit.  There's been a negative mantra towards the UK markets for a long time. Over the past 3 months you'd be in positive territory with UK exposure while US markets have turned negative. Shifts don't have to be seismic.  Soon there'll be threads pronouncing the benefits of holding UK shares again. Much of the best return on offer will already have been taken. 

I do still hold all those UK small caps, I still believe in it as a sector full stop. Stuff like Marlborough nano and micro are sitting on a loss for me, but I intend to hold them for a while. From what I can see the UK stuff doing well at the moment is the much ridiculed ftse 100 and similar, which besides accidental exposure I have no direction exposure too.

Still holding a position in HRI but its taken a pummelling soon, again, I don't intend to sell it soon, but it's also not a life changing allocation or percentage 

I viewed the FTSE 100 as practically uninvestable for a fair while myself, but if you think the market conditions of more significant inflation and rising rates are here for a while, its a lot more interesting than many major indices, you could hold a lot worse than lots of banks, miners and oil/gas producers in that kind of environment.

Obviously no certainty on that macroeconomic outlook but it looks a bigger risk than it has for a long while. 

Yep, similar views on FTSE100, however, those small caps and say HRI or Throgmorton (which I didn't get round to investing in because the fees put me off!) are pretty different beasts really. Having said that, I think you'd have done better from FTSE100 ytd than them, especially HRI which is basically a tech IT

GazzaBloom

Thrugelmir said:

ChilliBob said:

See that's the thing, a year ago people were warning about the US valuations, so, you decided to reduce the weight of them... To your detriment, I foujd myself doing the same - both then and now. Half heartily back then - I chose some Majedie fund with a lower US exposure, and a bunch of UK small caps. The Majedie has been a bit of a flop. I did consider a European and Asian tracker this morning to compliment the global but I didn't do anything in the end! 

Might as well hold a multi asset fund and let the investment managers progressively rotate the exposure as they think fit.  There's been a negative mantra towards the UK markets for a long time. Over the past 3 months you'd be in positive territory with UK exposure while US markets have turned negative. Shifts don't have to be seismic.  Soon there'll be threads pronouncing the benefits of holding UK shares again. Much of the best return on offer will already have been taken. 

"as they see fit" using sorcery, magic formulas and pixie dust no doubt. Or would it be better to simply hold a low cost index tracker fund that follows a global weighted index, as no-one can predict market shifts and trends with any certainty, ever.

I seem to recall around year end 2020 you confidently predicting that the S&P500 would drop 10% in 2021. Instead it gained 28% when tracked with a tracker fund such as VUSA.

In my contrary opinion, the days of the investment managers and their long term lower than index performance after fees will never return to popularity with people who have become self-educated enough to understand the basic concepts, we've seen behind the Wizard's curtain now.

GazzaBloom

GeoffTF said:

Thrugelmir said:

BrockStoker said:

Thrugelmir said:

@BrockStoker  "US growth stocks have performed consistently over the long term, and I see no reason why that shouldn't continue"

What time frame are you referring too? 

Which US stocks are top of your growth list? 

The last 30 years at least, and I think it makes sense to compare over the near term time frame rather than the longer term time frame as the further back you go, the more the consumer dynamic moves away from what we have today. 

Out of curiosity I pulled up the SP500 for 1992.  In descending order the largest companies in the index were

Exxon
General Electric
Wal Mart
AT&T
Philip Morris
Coca Cola
Merck
Royal Dutch Shell
Procter & Gamble
Bristol Myers Squibb

Not an era for high growth companies. More monopolies. That eventually all had their day at the top of the tree, . 

From Google: S&P 500 on 20 Dec 91 387.04 and 4417.44 on 11 Feb 22. That is a growth of more than 11 times. You would have either already own all the future growth stocks, or would have owned them as soon as they entered the index. A tiny percentage of active funds would have beaten that.

^^^ This.

If you own the index, you own the future risers and fallers, automatically switching your weighting to the winners over time.