Morningstar's Market Crystal Ball Irresponsible

[oaklanding]

I thought the recent statement (italicized below) on future market returns was an irresponsible statement by Morningstar. I've never known anyone who could predict the market. Where was the Morningstar article 10 years ago that said they anticipated that market returns would be quite high? I've subscribed to Morningstar's Premium for several years because I liked their portfolio analyzer tool, but I think I'm going to stop. I don't like the clickbait predictions. For decades I've always just invested and held. Never knew where the market was headed. Still don't. I don't think Morningstar does either.

Does the 4% Guideline Rest on a Flawed Assumption?, Christine Benz, Dec. 10

"Our recent research on safe retirement spending rates featured a flashy takeaway: Retirees who are using a fixed real withdrawal system on a balanced portfolio should start with withdrawals in the low 3% range, rather than the standard 4% guidance for starting withdrawals.

The reasoning is straightforward. The Morningstar Investment Management team expects stock and especially bond returns to be fairly modest over the next 30 years--a typical planning horizon for retirement--and they think the next 10 could be particularly weak."

Original Article:
https://www.morningstar.com/articles/1071612/does-the-4-guideline-rest-on-a-flawed-assumption

 

[Doingitwrong]

I also pay Morningstar. I read an opinion not a prediction.
And I’ve heard the same opinion echoed endlessly.
If I were starting a 30 year retirement now, I’d adjust my expectations, rebalance on schedule to book some gains, and be ready for a bumpy ride.

 

[OldShooter]

If they could make useful predictions they wouldn't be publishing them.

 

[mrfeh]

I also pay Morningstar. I read an opinion not a prediction.
And I’ve heard the same opinion echoed endlessly.
If I were starting a 30 year retirement now, I’d adjust my expectations, rebalance on schedule to book some gains, and be ready for a bumpy ride.

+1

There are those that use current valuations to predict returns for the next 10-20 years. These metrics aren't useful for short term (ie. 5 years), but may be accurate for longer time periods.

These folks say equity returns will be muted over the next 20 years.

Are they right? No way to know.

 

[DrRoy]

If they could make useful predictions they wouldn't be publishing them.

+1. If I had a crystal ball I wouldn't share. It would wreck the info. I never pay for investment predictions or a FA.

 

[chassis]

I find Morningstar’s writings saccharine and biased. I assign very little credibility to them.

 

[Andre1969]

Haven't these so-called "experts" been predicting that returns for the next 10 years or so will be lower than in the past oh, for decades now?

 

[razztazz]

Haven't these so-called "experts" been predicting that returns for the next 10 years or so will be lower than in the past oh, for decades now?

If I'm not mistaken that's all Bogle was doing too. Whom can you trust?

 

[Dtail]

If I'm not mistaken that's all Bogle was doing too. Whom can you trust?

Yeah didn't listen to his own advice that "Nobody knows nuthin:.

 

[Car-Guy]

I sat in on a 90min live Webcast yesterday with several of Schwabs experts... They talked a lot about the Feds comments this week and what that "might" mean for the near and longer term future of the "markets"... I thought it was interesting and considered what they said as their opinions/perspectives... Just more data for me to make my own decisions. Anyone who speaks in absolutes (especially on financial futures) immediately raises a red flag for me. If they really knew for sure, they wouldn't be working for a living.

 

[mrfeh]

For those that want to do more reading on this subject:

https://www.advisorperspectives.com...-accuracy-of-cape-as-a-predictor-of-returns-1
https://link.springer.com/article/10.1007/s12351-021-00658-x

 

[OldShooter]

... Whom can you trust?

To predict the future? No one.

 

[kgtest]

Analysts. Pfft. What do they know...if they knew what they say they do, they wouldn't be analysts, they would be flying around on jets and floating around on yachts.

I love how Jim Cramer literally less than a week ago said "I still expect a Santa Claus rally" as the market proceeded to take a complete nose dive. They sure do know it all, don't they.

 

[Montecfo]

Haven't these so-called "experts" been predicting that returns for the next 10 years or so will be lower than in the past oh, for decades now?

They have. And eventually they will be right I guess.

Having said that, I think the CAPE-10 is fairly useful in predicting returns over long time periods. Just hard to know when those will start. And of course all the govt spending and compliant FED has goosed things here, so maybe delayed the start. It is not useful for short periods-at all- though some seem to think it is a market timing tool.

I do think that the combination of high govt debt, rising interest rates and high CAPE-10 PEs does provide good reason to believe equity returns will be below the recent trend over the next 5-10 years. But the start can be delayed by more government debt, lower rates and higher earnings.

I do find morningstar to be valuable. I subscribe much of the time.

 

[Chuckanut]

Years ago I started making a record of interesting predictions, who made them and when they were made. I only recorded predictions by people with some credentials in the subject being talked about. Sorry Mr. Criswell.

Among the failures to date:

• Global cooling will cause food shortages by 2000.
• Peak oil hits in the early 2000's and it's down hill from there in terms of petroleum availability. $100 a barrel oil will seem cheap.
• Interest rates have nowhere to go but up (made about 2015)
• Telsa goes belly up in 2019, either going bankrupt or being preemptively sold to a major car company
• A Covid hurricane to hit the USA in March/April of 2021.
• Corona virus herd immunity in the USA by April of 2021.

You might as well watch Youtube videos of this fellow:

 

[OldShooter]

"The only function of economic forecasting is to make astrology look respectable.” Often attributed to John Kenneth Galbraith but apparently actually from Ezra Solomon, a member of the Council of Economic Advisors during the Nixon administration.