Vanguard’s top guy, Gregory Davis, is pouring cold water on the idea that US stocks will keep their amazing run going. He’s predicting much slower growth in the next 10 years.
Lower Returns Ahead for US Equities
Davis expects US stock market returns to plummet from the recent average of 12.4% annually to a much more modest 3.8% to 5.8% over the next decade. He says corporate profits have been unusually high and are unlikely to stay that way.
Rebalance Your Portfolio!
He also points out that the classic 60/40 stock/bond portfolio is now seriously out of whack for many investors. Years of strong stock performance have left many with far more money in stocks than they should have, and far less in bonds. A 60/40 split might now be 80/20 or even more skewed towards stocks. This is further complicated by the fact that US stocks have significantly outperformed international stocks recently, leaving many portfolios over-weighted in US equities.
Davis’s Portfolio Prescription
To fix this imbalance, Davis suggests a portfolio split of 60% bonds, 20% international stocks, and only 20% US stocks for the next 10 years. He argues that bond returns are now projected to be comparable to those of US equities, but with much less risk. He even questions the need to take on extra risk in stocks when safer options like Treasury bonds offer decent returns.
Bitcoin? Not So Much.
Davis isn’t a fan of Bitcoin, calling it “speculation” rather than a sound investment. He doesn’t see it as a core part of a well-balanced portfolio and says Vanguard won’t be offering any Bitcoin funds.