Alice In Wonderland Stock Market Gain Expectations Now Up To 17.5% Annually

Expect an Even Bigger Bone

The image (plus my comment about a bone) and the lead comment are from the WSK article When a 59% Annual Return Just Isn’t Enough

Let's compare investor expectations in the WSJ to John Hussman's latest expectations starting with some snips from the Journal.

In a recent survey of 750 U.S. individual investors, Natixis Investment Managers found these people expect to earn 17.3% this year, after inflation.

That might not sound like pie in the sky. The S&P 500 returned 18.4% last year, counting dividends, and is up 15.9% so far in 2021. Recent past returns always mold future expectations.

Over the long run, however, the people in the Natixis survey anticipate earning an average of 17.5% annually, after inflation—even higher than for this year. That’s up from the 10.9% long-term return they expected in 2019, the previous round of the survey.

It’s also more than twice the return on U.S. stocks since 1926, which has averaged 7.1% annually after inflation.

I asked Wharton Research Data Services, which analyzes business and investing information, to rank all U.S. stocks and exchange-traded funds over the last 10 years.

WRDS counted 3,790 stocks and ETFs that traded continuously over the 10 years that ended May 31, 2021. Only 14% earned total returns that exceeded 17.5% annually. Fully 22% earned negative returns.

In short, investors were more likely to lose money than to compound it by at least 17.5% a year.

It's the Starting Point Stupid! 

Author Jason Zweig hits the right idea with his final assessment at the end of the article: 

From today’s levels of interest rates and stock prices, I’d be thrilled if stocks returned at least 4% annually over the next decade or two after inflation. I’d also be surprised.

Alice’s Adventures in Equilibrium

With that, let's take a look at John P. Hussman's latest assessment in Alice’s Adventures in Equilibrium.

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