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Sharing of Inflation Rates, Rates of Return

Last Post by Greg Golich 3 years ago

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Greg Golich

(@golich428)

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Joined: 6 years ago

Posts: 88

December 20, 2023 2:20 pm

@Hines, Can you provide the document where Vanguard makes the case that you describe. I recently read Vanguard's 2024 Market Outlook and did not walk away thinking that the forward thinking has changed much.

@ all, here is a video showing the approach I prefer when I estimate forward returns for various asset classes. This video is building a case for international diversification but if you sign up for Asset Camp, you can do your own analysis.

https://www.youtube.com/watch?v=mhCJTWYkixY

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Pizza Man

(@pizzaman)

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Topic starter December 20, 2023 3:11 pm

@golich428 Very interesting video. I am not familiar with Asset Camp or Money for the Rest of Us. Have you read his book?

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Greg Golich

(@golich428)

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Joined: 6 years ago

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December 20, 2023 3:20 pm

Yes - I was one of his reviewers - a lot of good advice - don’t agree with everything.

I am a lifetime member and enjoy the information and perspective that David brings.

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Robert Wallace

(@wallace471)

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December 24, 2023 7:02 am

@golich428 A recent Bogleheads podcast features a discussion of the VCMM and the outlook: https://www.youtube.com/watch?v=6qNbIKZzeDM

Qian Wang, Ph.D., is featured. She is Vanguard’s Asia-Pacific chief economist and global head of the Vanguard Capital Markets Model team in the Investment Strategy Group.

https://corporate.vanguard.com/content/dam/corp/research/pdf/isg_vemo_2024.pdf

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Greg Golich

(@golich428)

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December 24, 2023 2:49 pm

@wallace471 I listened to that podcast yesterday. It was a great add to the Vanguard report. I think she makes some good points that many people miss when they just read the report. I like the fact that she points out that these are long term projections that are probabilistic not deterministic. We should all recognize that there is an range of uncertainty around them. She also clarified what they mean by "Time Varying Asset Allocation". It is not a market timing approach.

We also need to listen to other economists and firms because there are apposing views to all these assessments that may be just as valid. It is up to us to determine what estimates of returns and asset allocation best fits our unique situation.

@pizzaman I think it we should start a new thread called: 2024 Market and Asset Allocation Assumptions

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Robert Wallace

(@wallace471)

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December 25, 2023 7:24 am

Came across this article by Larry Swedroe at Kitces.com on the topic.

https://www.kitces.com/blog/international-diversification-equities-economic-theory-risk-management/

"In addition to overlooking global long-term recovery patterns, investors often fail to consider the important role that valuation changes play in investment returns. Despite the caveat that “past performance is no guarantee of future results”, the patterns of historic past earnings data can offer insight into how a company is valued, which can influence the performance of its shareholders’ equity. For example, a strong case has been made for the predictive value of the CAPE 10, a price-to-earnings metric designed to assess relative market valuation, which is especially insightful when it comes to long-term returns. As while investment returns can be driven by underlying economic performance, such as through growth in earnings, they can also be driven by changes in valuations. And even though timing markets based on valuations in the short-term has not proven to be a successful strategy, the CAPE 10 has been positioned as a useful predictor of long-term future returns. Given the current (as of March 2023) economic positions for the U.S. CAPE (at 3.4%) and the EAFE CAPE 10 (5.6%), unless these values change, investors can reasonably estimate EAFE markets to outperform the S&P 500 by 2.2% annually."

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Pizza Man

(@pizzaman)

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Topic starter December 25, 2023 2:36 pm

@golich428 your new thread has been added under "Sharing of Inflation Rates, Rates of Return.

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Greg Golich

(@golich428)

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Posts: 88

December 26, 2023 10:45 am

@pizzaman Thanks for setting that up.

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