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"Experts" Forecast Stock and Bond Returns: 2025 Edition
"Long-term return expectations drop across major asset classes, and some firms are now forecasting higher returns for bonds than US stocks over the next decade."
Agreed. When I can see that a human wrote a thing at Morningstar, I'm more apt to pay attention. Even then, they are too generous, often, with their evaluations.
Over the next few years, IMO, yield 1-2%, earnings growth 5-8%, change in P/E -3% to -7% (fwd P/E).
So, %TR range -1% to +7% annualized over the next "few" years; I am not telling how many is "few". Some stocks will do much better than this and some much worse. It would be a trading market.
What about bonds? 2024 turned out to be not as great as expected even with a total of 1% rate cut while the longer end treasury yield went up about 1% as well.
Is M*’s writing getting worse or part of it generated by AI?
Seriously wondered the same. I know their medalist ratings and pillar reviews are done via AI. They are horrible.
As a subscriber I can attest the writing is not getting better. Probably worse. Fund analyses sound about 90% AIcomputer generated (but I really can’t say) and the same observations are often repeated a second time in the same piece. Most are excessively wordy. They focus a lot on recent manager turnover which they view as a negative. I suspect that’s because it’s easy to document “turnover” without giving consideration to actual qualifications which takes more research.
What P’s me off the most is that I once understood their medalist ratings to represent something more tangible or enduring and less fleeting than recent performance (which the stars represent). A counter-balance of sorts. But, in truth, those medalist ratings seem to follow the performance of the fund - though they may lag a bit. I’ve seen several I follow drop from “gold” or “silver” to only “neutral” or “bronze” (3rd or 4th place) inside of 6 months. How do you screw up a previously stellar fund in 6 months? If you want to buy what’s done well lately, go ahead. But lagging the markets (or a fund sector) over short periods isn’t always a sign of deteriorating management.
All in all, M* reviews provide some interesting insights. Better I suppose than nothing. But very superficial overall.
The medalist ratings are supposed to be qualitative while star ratings are quantitative. Disregard all medalist ratings which were not produced by actual analysts (i.e., AI generated). These ratings are currently worthless. The quality of an analyst's rating can vary significantly depending on their expertise. I have access to M* Fund Reports (includes M* Pillars and M* Medalist Ratings) via my library. Some M* Fund Reports are very good, others much less so. Regardless of the overall report quality, I often discover tidbits of potentially useful data which can be otherwise difficult to obtain elsewhere.
Agree @Observant1. You said it well. However some of them don’t seem up to AI standards as I understand it. Crediting them to AI may constitute an insult to Artificial Intelligence.
2. Mid 1980s-1990s. Expert systems, machine learning/reasoning. Memory intensive for the time. The academic response was that we'll just wheel in another memory bank.
I have access to the individual stock evaluations, too. I'm not sure if ALL of them are human-written. But they are more specific than almost all of the fund-AI-generated drivel.
I have access to the individual stock evaluations, too. I'm not sure if ALL of them are human-written. But they are more specific than almost all of the fund-AI-generated drivel.
I have access to the individual stock evaluations, too. I'm not sure if ALL of them are human-written. But they are more specific than almost all of the fund-AI-generated drivel.
@Sven, bond market returns depend a lot on the Fed policy (and even the Fed doesn't know that ahead) and bond vigilantes (they were in hibernation for a long time).
Barron's recently noted that we are now in the 6th year of the 3rd great bond bear market. Who could have guessed? Hopes for a good bond year have been quashed repeatedly.
And now some are saying that 10-yr yield at 6% is plausible (it's 4.62% now).
I like allocation/balanced and multi-asset funds, so I keep an eye on both the stock and bond markets. Many have given up on those.
@bee / To pull up the limited available stocks M* carries just type in the ticker symbol in the same field where you would normally enter a fund’s symbol. When I’m logged in it’s near the top of page. Says “search for investment…” I just did a quick test using NVDA. First a performance graph surfaced. But there was also a link along with that to “Read full report.” Hitting that pulled up a 6 or 7 page detailed assessment of Nvidia.
@yogibb, really appreciate your comments on bonds. Where can one track bond flow if that is an of bond trader’s buying and selling?
Someone is selling the long bonds heavily so to drive up the 10 year treasury yield since October. Who are these sellers ? I notice the spreads between the 2 yr-, 3 yr- and 5 yr- treasuries to the 10 year treasury have turned positive in December. And that is a significant change from the inverted yield curve since 2022. What are the implications for bonds going forward?
I too like balance and asset allocation funds, especially actively managed funds. Sometime seeing what their bond sleeves hold provide insights on what segments are working.
@Sven, specific info on buyers and sellers is hard to get.
But beware of the news and analysis that may be outdated by the time you may read it.
Checking TLT flows via MFOP, there were outflows from 11/11/24 to 1/2/25. Now there are some inflows from 1/2/25. Longer term, there were strong inflows from 2/3/22 to 11/11/24.
Bondland: If you look at generic, typical funds, you get a lot of volatility without knowing the results because the Fed is in control. To make a much better risk/reward decision, you must find these unique bond funds, which we discussed here for about 2 years with less dependency on the Fed. These funds also have higher distributions, lower volatility, and usually better performance. This is why I never invested in high-rated bond funds; think BND, DODIX, and Treasury.
Why would anyone be serious about predicting the future, except for cheap publicity?
Since bond funds surfaced in the discussion, I’ve attempted to utilize a share option in my Barron’s subscription to link an article. I hope it works. This one on bond funds I found interesting.
@FD1000 - I think you can read other “expert” opinions even if you consider yourself one of them. I don’t think you have to follow any expert’s advice. If they are “big” enough they will acknowledge that they might be wrong.
There’s an old expression - ”Put this in your pipe and smoke it” - meaning to listen to a line of reasoning and then carefully consider it. True of reading expert opinions ISTM.
Barron's limited sharing feature has been around for a while - my bold below. But as Barron's also sells reprints, I don't know when it puts its foot down. Of course, it won't know who's who at MFO, but it may ask MFO admins to act.
"9.3.1 You may occasionally download, print and/or store articles from a Service for your individual, personal, and non-commercial use, provided that you maintain all copyright and other notices contained in the Content and other downloadable items. You may not otherwise download, print, store or provide others with access to such articles except through the share features we have included in a Service. These share features are intended to allow you to share articles and other Content from a Service with a few individuals on an occasional basis. They may not be used to regularly provide others with access to Content from a Service or for sharing Content from a Service with a large number of individuals. In addition, you may not use articles you have downloaded, printed or stored to develop or operate an automated trading system, or for data or text mining any information or content (including associated metadata)." https://www.dowjones.com/terms-of-use/
Thanks for the warning @yogibearbull. My intent is to use the feature exceedingly sparingly. Was just curious to see if it worked.
Most here are obviously quite wealthy and have profited greatly from all the information shared here. So, ISTM most can afford to subscribe to a number of quality publications and in the process support the publishing industry, much of which is suffering. Not trying to drive business to Barron’s. The NYT was recently mentioned in similar context in a different thread. Choose the ones you like and pay-up.
hank: @FD1000 - I think you can read other “expert” opinions even if you consider yourself one of them. I don’t think you have to follow any expert’s advice. If they are “big” enough they will acknowledge that they might be wrong.
FD: I never said I'm an expert. My point is that over 95% of the investment 24/7 media press and talk is meaningless. I consider these as entertainment. I have a hiking retiring buddy who is a professor from a known university. This guy has worked with many of the top economists and business professors. They have been making forecasts for decades and were wrong, and when he asked, why would they do a stupid thing like that? The answer was everyone will remember me after I was on TV (and I will make money from it); nobody will remember what I said....enough said.
Thanks @FD. A lot of that is true. Note that @Observant1 actually put quotation marks around “Expert” in the thread’s title - intending perhaps that the term be taken with a large grain of salt. When I worked as a kid at a filling station / garage the owner was occasionally harassed by Standard Oil to maintain the business according to their codes. He dreaded the guys from the company stopping by unannounced to inspect the joint. And he taught me that the definition of expert is: “some SOB from out of town.”
I also think it’s unwise to completely disregard cogent commentary from the likes of Howard Marks or David Giroux. Just maybe …. maybe …. these guys know a little more about investing than you or I. And if you posted all your trades in advance instead of after you’ve made a reported small fortune on them maybe more here would believe you.
PS - I enjoy Bloomberg. But you are spot-on. It’s entertainment. “Woe Is He” who buys and sells financial securities or products based on what the latest talking head recommended.
Comments
%TR = %Dividend_yield + %Earnings_growth + %Change_in_P/E .
Over the next few years, IMO, yield 1-2%, earnings growth 5-8%, change in P/E -3% to -7% (fwd P/E).
So, %TR range -1% to +7% annualized over the next "few" years; I am not telling how many is "few". Some stocks will do much better than this and some much worse. It would be a trading market.
What about bonds? 2024 turned out to be not as great as expected even with a total of 1% rate cut while the longer end treasury yield went up about 1% as well.
As a subscriber I can attest the writing is not getting better. Probably worse. Fund analyses sound about 90%
AIcomputer generated (but I really can’t say) and the same observations are often repeated a second time in the same piece. Most are excessively wordy. They focus a lot on recent manager turnover which they view as a negative. I suspect that’s because it’s easy to document “turnover” without giving consideration to actual qualifications which takes more research.What P’s me off the most is that I once understood their medalist ratings to represent something more tangible or enduring and less fleeting than recent performance (which the stars represent). A counter-balance of sorts. But, in truth, those medalist ratings seem to follow the performance of the fund - though they may lag a bit. I’ve seen several I follow drop from “gold” or “silver” to only “neutral” or “bronze” (3rd or 4th place) inside of 6 months. How do you screw up a previously stellar fund in 6 months? If you want to buy what’s done well lately, go ahead. But lagging the markets (or a fund sector) over short periods isn’t always a sign of deteriorating management.
All in all, M* reviews provide some interesting insights. Better I suppose than nothing. But very superficial overall.
Disregard all medalist ratings which were not produced by actual analysts (i.e., AI generated).
These ratings are currently worthless.
The quality of an analyst's rating can vary significantly depending on their expertise.
I have access to M* Fund Reports (includes M* Pillars and M* Medalist Ratings) via my library.
Some M* Fund Reports are very good, others much less so.
Regardless of the overall report quality, I often discover tidbits of potentially useful data
which can be otherwise difficult to obtain elsewhere.
1. Late 1950s - 1960s. Think ELIZA
https://www.livescience.com/technology/eliza-the-worlds-1st-chatbot-was-just-resurrected-from-60-year-old-computer-code
2. Mid 1980s-1990s. Expert systems, machine learning/reasoning. Memory intensive for the time. The academic response was that we'll just wheel in another memory bank.
3. Now. Generative AI. Power hungry. We'll just bring another nuclear reactor online.
https://www.technologyreview.com/2024/09/26/1104516/three-mile-island-microsoft/
Where do you turn to for individual stock evaluations?
Barron's recently noted that we are now in the 6th year of the 3rd great bond bear market. Who could have guessed? Hopes for a good bond year have been quashed repeatedly.
And now some are saying that 10-yr yield at 6% is plausible (it's 4.62% now).
I like allocation/balanced and multi-asset funds, so I keep an eye on both the stock and bond markets. Many have given up on those.
Someone is selling the long bonds heavily so to drive up the 10 year treasury yield since October. Who are these sellers ? I notice the spreads between the 2 yr-, 3 yr- and 5 yr- treasuries to the 10 year treasury have turned positive in December. And that is a significant change from the inverted yield curve since 2022. What are the implications for bonds going forward?
I too like balance and asset allocation funds, especially actively managed funds. Sometime seeing what their bond sleeves hold provide insights on what segments are working.
But beware of the news and analysis that may be outdated by the time you may read it.
Checking TLT flows via MFOP, there were outflows from 11/11/24 to 1/2/25. Now there are some inflows from 1/2/25. Longer term, there were strong inflows from 2/3/22 to 11/11/24.
https://www.morningstar.com/?utm_source=eloqua&utm_medium=email&utm_campaign=ind_retention&utm_content=46207
If you look at generic, typical funds, you get a lot of volatility without knowing the results because the Fed is in control.
To make a much better risk/reward decision, you must find these unique bond funds, which we discussed here for about 2 years with less dependency on the Fed. These funds also have higher distributions, lower volatility, and usually better performance.
This is why I never invested in high-rated bond funds; think BND, DODIX, and Treasury.
Why would anyone be serious about predicting the future, except for cheap publicity?
Barron’s - Actively Managed Bond Funds Outperformed Indexes
@FD1000 - I think you can read other “expert” opinions even if you consider yourself one of them. I don’t think you have to follow any expert’s advice. If they are “big” enough they will acknowledge that they might be wrong.
There’s an old expression - ”Put this in your pipe and smoke it” - meaning to listen to a line of reasoning and then carefully consider it. True of reading expert opinions ISTM.
"9.3.1 You may occasionally download, print and/or store articles from a Service for your individual, personal, and non-commercial use, provided that you maintain all copyright and other notices contained in the Content and other downloadable items. You may not otherwise download, print, store or provide others with access to such articles except through the share features we have included in a Service. These share features are intended to allow you to share articles and other Content from a Service with a few individuals on an occasional basis. They may not be used to regularly provide others with access to Content from a Service or for sharing Content from a Service with a large number of individuals. In addition, you may not use articles you have downloaded, printed or stored to develop or operate an automated trading system, or for data or text mining any information or content (including associated metadata)."
https://www.dowjones.com/terms-of-use/
Most here are obviously quite wealthy and have profited greatly from all the information shared here. So, ISTM most can afford to subscribe to a number of quality publications and in the process support the publishing industry, much of which is suffering. Not trying to drive business to Barron’s. The NYT was recently mentioned in similar context in a different thread. Choose the ones you like and pay-up.
FD: I never said I'm an expert. My point is that over 95% of the investment 24/7 media press and talk is meaningless. I consider these as entertainment.
I have a hiking retiring buddy who is a professor from a known university. This guy has worked with many of the top economists and business professors. They have been making forecasts for decades and were wrong, and when he asked, why would they do a stupid thing like that? The answer was everyone will remember me after I was on TV (and I will make money from it); nobody will remember what I said....enough said.
I also think it’s unwise to completely disregard cogent commentary from the likes of Howard Marks or David Giroux. Just maybe …. maybe …. these guys know a little more about investing than you or I. And if you posted all your trades in advance instead of after you’ve made a reported small fortune on them maybe more here would believe you.
PS - I enjoy Bloomberg. But you are spot-on. It’s entertainment. “Woe Is He” who buys and sells financial securities or products based on what the latest talking head recommended.
This is the same credibility issue that he faces on other sites. One would think that it is easily correctible, but it has not been.