Jack Bogle's dour forecast

[NW-Bound]

Guru Grades

It's a bit dated (2005 - 2012 data) but I doubt the bottom line of an average accuracy of 47% has changed much.

Bogle is not on the list!

That's because he and people like Buffett know that they cannot predict what the market will do next year.

What Bogle offers is the outlook for the next decade.

I never care for the Bogleheads and their forum. But I still listen to Bogle.

PS. I do not know why people are upset with his projection for low market returns. If people are planning their retirement on 10-15% return, they can just ignore him and go ahead with their plan. He cannot stop anyone from doing so.

 

[DrRoy]

Why would anyone expect past stock market growth levels to be sustained? Stock prices rise when earnings grow and/or PE expands. PE's are at historic highs. Not a lot of room to grow. Earnings are driven by economic growth, population growth, and productivity growth. All of these are lower than in past decades.

 

[DEC-1982]

I have kept track of some predictions from various sources. Here are Bogle's:
2012 - 7% stks & 3% bonds for next decade, minus 2% inflation.
2015 - 4% stks & 3% bonds for next decade, minus 2% inflation.
2018 - 4% stks & 3.5% bonds for next decade, minus 2% inflation.

FWIW, Michael Kitces in 2016 - Using Shiller PE, real returns of stocks 2% through 2020's, and 1% real for bonds. 2030's and 40's could be quite good for investors.

So, hang in there till the 2030s!

When I look at FIDO RIP, the first 10 years always stink, no matter whether you started now or whether you started in 2015 or in 2012. One recent analysis (this year) showed 2.09% growth annualized over 10 years. But many of us are looking beyond 10 years. If you get past the initial poor sequence of returns in good shape, you are all right for the long run.

 

[Cut-Throat]

I retired at 54.5 and left enough in my 401K to draw 4.5% each year (no inflation adjustments) and lived in that exclusively till a bit past 59.5 when I could get to my IRA money. So I guess I came pretty close to employing it so far.

The problem with employing a 4% SWR with inflation adjustments, comes when a severe market downtown occurs... I don't think anyone has the 'guts' or foolishness to continue to take the 4% plus inflation adjustment into the teeth of a Bear Market. Human nature will take over, and you will pull in your horns (Probably more than necessary) and if you really panic you'll sell your stocks at the bottom.


Better to have a workable Plan like VPW to keep you on track and keep your head!

 

[Dtail]

When I look at FIDO RIP, the first 10 years always stink, no matter whether you started now or whether you started in 2015 or in 2012. One recent analysis (this year) showed 2.09% growth annualized over 10 years. But many of us are looking beyond 10 years. If you get past the initial poor sequence of returns in good shape, you are all right for the long run.

I believe that Fido RIP reduces your portfolio by ~15% in the first year and goes from there.

 

[MichaelB]

PS. I do not know why people are upset with his projection for low market returns. If people are planning their retirement on 10-15% return, they can just ignore him and go ahead with their plan. He cannot stop anyone from doing so.

I agree. If people think returns will be higher (or lower), share why and act accordingly.

Even if one disagrees with Mr. Bogle, it seems a bit shortsighted to just write it off and ignore it. The man is intelligent. Also, this debate is over the absolute number, which (IMO) is less relevant, and ignores the framework and methodology Bogel uses, which (IMO) is more meaningful.

 

[street]

It will be, what it will be, and each need to do and prepare for the years they have left in retirement or if you are just planning. I do believe that the numbers have shown for 10 plus years, the average percent of gains is 7%. This has been the average (7%) for the history of the DJ. Correct me if that is a false statement. I would never use that number when making a plan for retirement. I have done some projections but I use 2% over the long haul, 10 plus year for my investments to see where I could be at, down the road.

 

[GravitySucks]

The problem with employing a 4% SWR with inflation adjustments, comes when a severe market downtown occurs... I don't think anyone has the 'guts' or foolishness to continue to take the 4% plus inflation adjustment into the teeth of a Bear Market. Human nature will take over, and you will pull in your horns!

Could be that I'll spend less when we got a true Bear, but it will be more from Fear and Greed than foolishness. The nice thing about Bengens SAFEMAX is that it accounts for Bears. I hope to actually have the courage to spend a bit extra when the next recession hits as some toys i want will go on sale. Some years like this one will have low spending, some will have higher spending, but that's more due to travel costs in my case than what the market does.

Now that I have access to the IRA I use Fidos planner to set my guard rail. That uses way worse scenarios than what Mr. Bogle has forecast for the next 10 years, so I'm hoping he's correct.

 

[NW-Bound]

It will be, what it will be, and each need to do and prepare for the years they have left in retirement or if you are just planning. I do believe that the numbers have shown for 10 plus years, the average percent of gains is 7%. This has been the average (7%) for the history of the DJ. Correct me if that is a false statement. I would never use that number when making a plan for retirement. I have done some projections but I use 2% over the long haul, 10 plus year for my investments to see where I could be at, down the road.

It's for a lot longer than 10 years. Maybe 20+ years.

From 1965 to 1975, the market return was 0, after accounting for dividend and inflation.

More recently, it's the same from 2000 to 2011.

 

[street]

NW-Bound >>> thanks for that information. After reading your response I googled and found that the average is 7%, but like you said it is for 20 plus years. Thanks.

 

[Rianne]

Washington has nothing to do with Bogle's forecast - it is simple math. The 10 year yield for bonds, current dividend yield plus earnings growth minus P/E contraction for stocks.

The last two elements are Bogle's forecasts, but his numbers are within historical norms.

Really?
http://www.early-retirement.org/forums/f44/tariff-relief-rally-95035-4.html

 

[bobandsherry]

I agree. If people think returns will be higher (or lower), share why and act accordingly.

Even if one disagrees with Mr. Bogle, it seems a bit shortsighted to just write it off and ignore it. The man is intelligent. Also, this debate is over the absolute number, which (IMO) is less relevant, and ignores the framework and methodology Bogel uses, which (IMO) is more meaningful.

He's not really saying anything, and based on his past years he's not been accurate. Here's my predictions, some years will be great, some will be good, some will be bad and others will be downright terrible. I'll go as far as to say the next year will be much leaner than the past 3-5, and probably see a drop in markets driven by recent changes in taxes, world economics and other unrests that makes the market react irrationally and volitility to the downside, offsetting the irrational upside from the past couple of years.

 

[NW-Bound]

I believe Bogle's intention is to temper the expectation of investors. Shiller's has been the same.

In fact, a couple of years ago, in an interview Shiller warned that young people needed to save a lot more for retirement than they thought they needed to. Of course, the market was rising like crazy at that time, and they laughed at him. And the media has been flooded with articles about young 30-something people dropping out of the workforce with less money than us geezers did in our 50s and 60s.

We shall see who's right. But as for me, I have been living fine on 2.6% WR, and if the market shrinks my stash, that WR may go up to 4%. I will not be happy, but it does not change my lifestyle. And then, there's SS if I need it.

 

[MichaelB]

He's not really saying anything, and based on his past years he's not been accurate.

Looks to me like he said something pretty specific.

Over the next decade, stocks will return an average of 4% annually while bonds will earn 3.5% annually, he forecast. Both predictions are significantly lower than historic returns since 1974 of 11.7% for stocks and 8% for bonds.

He’s not forecasting next year will be 4%, he is projectng the annualized total rate of return over the next 10 years.

It’s not about being accurate. I think it makes sense to understand and learn from his methodology and projection.

 

[OldShooter]

... the market return was 0, after accounting for dividend and inflation. ...

... the average is 7% ...

I think you guys are talking apples and oranges. 7% is the nominal return, zero is a constant dollar aka purchasing power return.

I think @NW-Bound's assertion could better be stated as " .. during those periods an equity investor's purchasing power was retained but did not grow. ... " And, actually, that is not at all a bad result.

A problem with this type of discussion, too, is that endpoints can often be cherry picked to support the poster's view. A more serious study would involve looking at every ten-year period and every twenty-year period. There have been 52 ten-year periods since 1965, @NW-Bound's date. How many of them yielded zero real growth?

 

[Big_Hitter]

I believe Bogle's intention is to temper the expectation of investors. Shiller's has been the same.

of course these guys sandbag, hard

why wouldn't they?

 

[NW-Bound]

Bogle is talking about the next 10 years. I just pointed out that there have been 10-year periods even worse.

So, what Bogle says is not so bad, and I would not mind having that.

If anyone wishes for more, he is certainly entitled to do so. It's still a free society.

PS. I forgot that even in not-so-free societies, people can still harbor any thoughts that they want. They just cannot post them publicly as we do.

 

[bobandsherry]

Looks to me like he said something pretty specific.

He’s not forecasting next year will be 4%, he is projectng the annualized total rate of return over the next 10 years.

It’s not about being accurate. I think it makes sense to understand and learn from his methodology and projection.

Show me how well he has predicted the past 10 years and and then years before that. Everyone has someone they follow, I just include him with that of a dozen other opinions.

 

[USGrant1962]

Really?
http://www.early-retirement.org/forums/f44/tariff-relief-rally-95035-4.html

Really. Bogle has used the same formula for years.

 

[corn18]

Works great for me as I am using 2% real total return for my retirement planning. 1.75% + dividends is just peachy for me.

 

[Scuba]

Here you go:

Guru Grades

It's a bit dated (2005 - 2012 data) but I doubt the bottom line of an average accuracy of 47% has changed much.

Interesting data. Louis Navellier’s Blue Chip Growth newsletter is one I’ve followed over the years. Even though his average % right is only 60%, the data says that his Blue Chip Growth newsletter has consistently outperformed the market index. Interesting.

 

[Scuba]

We’re kind of new to ER - only been retired for 2 years. I could be wrong, but I see no reason not to assume that markets will perform similarly over the long term as they have in the past. I can’t predict the short term. Whenever the next inevitable correction happens, it happens, and it shouldn’t affect our plans too much. Maybe we’ll start SS and/or pension sooner than planned so we can stay fully invested until the market comes back, as it always has over time. The average correction doesn’t last too long.

 

[NYEXPAT]

We’re kind of new to ER - only been retired for 2 years. I could be wrong, but I see no reason not to assume that markets will perform similarly over the long term as they have in the past. I can’t predict the short term. Whenever the next inevitable correction happens, it happens, and it shouldn’t affect our plans too much. Maybe we’ll start SS and/or pension sooner than planned so we can stay fully invested until the market comes back, as it always has over time. The average correction doesn’t last too long.

If this is just a correction, it should be over within 45 days based on historical data.

 

[USGrant1962]

If this is just a correction, it should be over within 45 days based on historical data.

What data? I'm looking at Yardeni's nice report and by eyeball it looks like common corrections last maybe 60 to 90 days, and 100+ days is not uncommon.

He updates this daily: https://www.yardeni.com/pub/sp500corrbear.pdf

 

[NW-Bound]

Bogle did not talk about the ongoing correction.

People keep confusing short-term corrections with longer-term returns. The difference between them is like that between climate and weather.

It is not possible to predict when the next hurricane will hit Miami. But it is possible to track the average temperature, and see that it is creeping up from one decade to the next.