What is your 10 year expected return for the following:
SPY
IWM
TLT
Here are mine:
SPY: 6.5% including dividends
IWM: 4% including dividends
TLT: 2%
Charles,
Thank you very much!
I was thinking about TLT last night (woke up with this thought actually).
Won’t there be an equilibrium between large-caps and TLT?
By that I mean, if the returns for bonds gets too low won’t people move to equities? Large moves would affect demand for bonds and yields would be affected by the change in demand.
I do not disagree with your numbers and I have no numbers of my own to contribute. But isn’t the discrepancy between the returns of bond and stock returns limited in a free market?
I also understand institutions may be placing money elsewhere (e.g., credit default swaps). If they can place a lot of money elsewhere then an equilibrium between equities and bond could be weak.
I was wondering if anyone thinks of this or has any more ideas on bonds (or recommended references).
Again, thank you for your ideas.
Best,
Jim
10-year expected return? Even prediction for 1 year is cloudy.
Conclusions seem a bit extreme. The amount of change that will happen is probably the same as occurred after the 2008 financial crisis.
What shocks me is that a one month shut down can put so many businesses on the edge. But this is what happens when there is no room given for savings and buffers. The incentives currently for corporations are all wrong. That needs to change. Airlines for example should be allowed to go bankrupt if they don’t have enough to fund themselves through emergencies like this. Their stakeholders who profited from buybacks should be incentivized to cough up the capital to keep them running not the government.
SteveA,
Thank you. Great in generally. Really good on bonds.
I have nothing to add except that I have seen bonds and equities get correlated before in 2008. I do not know enough to know what will happen here and now. Just that it is possible.
Best,
Jim
The embedded video is a great primer for those of us that don’t understand the workings of the financial system.
