Most people, especially those accumulating money to use in retirement, wonder how the financial future is going to play out. I want to be absolutely clear that I have no clue.
That being said, I tend to rely on those whose job it is to make predictions, whose resources are global, and whose track record to date is far more comprehensive than mine. A money management firm that I use personally is a global leader and has been for many years. You know it as Vanguard.
An email I received today referenced a just published research report. The full report is 48 pages long and can be downloaded. You can also download a quick overview consisting of 4 pages which can be found here: https://advisors.vanguard.com/iwe/pdf/FAVEMOSP.pdf
Here are the key takeaways:
- Increasingly unpredictable policy environment is undermining economic activity.
- Global growth to slow further but we’re a long way from a serious global contraction.
- The chance of a large drawdown in stocks and other high-beta assets remain elevated.
The obvious question now becomes: what does all that mean? While the title of the document references 2020, there is also an Investment outlook on page 1 with a chart that provides a “…10-year annualized nominal return projection, based on market conditions as of September 30, 2019”.
For me, it means there is a relatively high degree of uncertainty across the planet. That in turn tends to push the envelope toward contraction and caution. The report suggests that in periods of high uncertainty, year-over-year global growth is likely to average around 4%. As uncertainly dissipates, the number is likely to go higher.
There has long been a consensus among financial advisors that the strong returns we’ve experienced over the past decade are not likely to last. Personally, I’ve now been wrong for the last four or five years, having become too cautious, given my experience over the years that good times always end.
For those of you who don’t want to bother with the four page report, here are the section headings:
- Growth: Prospects around the globe are deteriorating
- Monetary Policy: The pivot to looser policy continues
- Investment Outlook: Subdued returns ahead
There are several charts for those of you who appreciate visual elements. For those of you making your own decisions about your money, there are subsets of relevant information under each of the above section headings. Good luck.
Tony Kendzior \ 19 DEC 2019