How low will the S&P 500 go? Buffett and Shiller know

Every trader’s secret wish is to be psychic. If we could only know in advance whether the market was going to go up or down.

Well, good luck trying to predict next year’s return—or even just tomorrow’s. But surprisingly, there are several recognized methods for projecting the S&P 500’s return in the next 7 to 15 years, and they’re pretty good.

Decade-length forecasts won’t help any day traders make big profits this week. But longer-term investors can benefit a lot from these forward-looking estimates. Whatever goal you may be saving money for—a kid’s college tuition or a financial-freedom day that may be 10 years in the future—you want the answer to two questions:

Are we entering a “go-go decade,” such as 2009–2018, when most stocks grow up, up, up?

Or is this the beginning of a “bummer decade,” such as 2000–2009, when stock markets around the world crashed twice, ending not far from where they started?


Here are the predictions:

Shiller’s P/E10 predicts a 2.6% annualized real total return.

Buffett’s MV/GDP says minus 2.0%.

Tobin’s “q” ratio indicates minus 0.5%.

Jones’s Composite says minus 4.1%.

The predictions might seem far apart, but they aren’t. The forecasts are all much lower than the S&P 500’s annualized real total return of about 6% from 1964 through 2018.

Read the full article by Brian Livingston at Marketwatch

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