It’s been an incredible decade for stocks.
The S&P 500 is up over 350% in the last decade, and even more if measured from 2009’s lows.
Naturally, many investors are both giddy and afraid of such incredible returns, 16% CAGR for the past 12 years. That’s about double the market’s historical returns and has stretched valuations to levels that have most analysts expecting very modest returns for the next five years.
S&P 500 2026 Consensus Total Return Potential
(Source: FAST Graphs, FactSet Research)
5% annual returns are far from catastrophic, but they are 1/3rd what investors have enjoyed for the last decade.
But these are just the consensus forecasts, and some blue-chip analysts are expecting a potential lost decade for stocks.
Here are four facts you need to know about why market returns could suck for the next decade, and most importantly how you can safely avoid the kind of poor returns that can sink your rich retirement dreams.
Fact One: The Most Bearish Main Stream Analyst Forecasts
Moody’s is one of the 16 most accurate economist teams in the world according to MarketWatch, and its forecast for the next decade is rather bleak.
Moody’s base case forecast six months ago was that stocks could post negative returns for the next decade.
That’s largely due to Moody’s base-case forecast for long-term interest rates hitting 4.3% on the 10-year yield by 2030.
A slightly less bearish outlook comes from the quant team at Bank of America.
- Bank of America outlines what could make or break an investor’s ability to generate positive stock-market returns over the next decade
Led by equity and quant strategist Savita Subramanian, the bank highlighted that its valuation model is currently forecasting a flat return over the next decade for stocks – or 0% – according to a Friday note that cited supply-chain woes and peak globalization…
To combat the potential 0% returns over the next decade, BofA says the number one thing an investor can do is reinvest their dividends.
“The simple act of reinvesting dividends could yield a total return equivalent to the S&P 500 at 6,000 in 2031, assuming long-term average growth and payouts,” the note said. Hitting that mark in the next 10 years would represent a total return of only 36% for the S&P 500, or an annualized gain of about 3%.” – Business Insider
If you reinvest dividends then BAC thinks you could achieve 3% annual returns, about 20% of what investors have seen in the last 10 years.
Fact Two: The One Thing Most Likely To Cause A “Lost Decade” For Stocks
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Source: Dividend Sensei
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