Assuming that the current market value return is little more than 6.0%, and a reasonable level of dividends and net repurchases are expected, then the ratio of stock value to GDP will increase by more than 20 times. However, this seems not reasonable.
Our estimates indicate that in the next 8 years, the stock market and bonds may fall below their annualized yields from 1980 to 2020. The expected annual rate of return for US large-cap shares for the next 10 years is 8.0%, while the historical period’s annualized rate of return is a little above 10.00%. Small stocks, large international stocks are also expected to show lower returns by for the next 10 years. Though, the expected yearly return of large international stocks is around 10% in some countries in the next decade which is more than the expectations of large-cap of US market.
Future of the stock market
Therefore, most of the time our actual investment returns tend to be higher or lower than average. These are random factors that cannot be predicted by even expert investors. If in the end our performance is much higher than the average and we can stay at that level long enough, then we may actually affect the rise of the average itself.
The future of the stock market may be different from the past. The first change involves the latest developments in the capital market, which have reduced the cost of stock investment and led to increased ownership. The second change is the high current value of the stock market relative to various benchmarks; the third is the expected slowdown in future economic growth. In this discussion, it is important to realize that the decline in stock premiums is not necessarily related to the decline in stock yields, because bond yields may rise.
Returns could go beyond the expectations of market analysts if the U.S. economy grows more than we anticipate. In terms of consensus forecasts, economists anticipate around two percent annual GDP over the next decades. Higher economic growth than this prediction would probably guide to advanced earnings growth. The condition will then drive share market and bond yields higher. The economy was rising more than expected in the ’90s. During that era, market researchers expected annual gross domestic product growth of a little more than 2%, while the U.S. economy really grew way more than 3.0% per year on average. At the same time, returns from U.S. large-cap stocks were more than 18.0% on average. On the other hand, bonds’ average return was around 8.0%. These kinds of returns were possible even with share market turmoil in 1998. Before trading, you can check at https://www.webull.com/quote/exthoursranking.