Found via The Idea Farm.
Executive summary. Some say the long-run outlook for US stocks is poor (even ‘dead’) given the backdrop of muted economic growth, already-high profit margins, elevated government debt levels, and low interest rates. Others take a rosier view, citing attractive valuations and a wide spread between stock earnings yields and Treasury bond yields as reason to anticipate US stock returns of 8%-10% annually, close to the historical average, over the next decade. Given such disparate views, which factors should investors consider when formulating expectations for stock returns? And today, what do those factors suggest is a reasonable range to expect for stock returns going forward?