Morgan Stanley: Get Used To Low Returns And Buy Bonds

Morgan Stanley: Get Used To Low Returns And Buy Bonds

“A traditional 60/40 US equity/bond portfolio expected return over the next decade is just 3.7% return per year, 2.0% real, close to the lowest in history.”

Assuming inflation does not exceed 1.7% annualized over the next decade, investors running a 60/40 US equity/bond portfolio should expect to generate a real return of no more than 2% per annum between now and 2026. This dismal statement is the key takeaway from Morgan Stanley’s most recent (October 23) Cross Asset Dispatches research report on projected investment returns.

Equity and fixed income returns since the financial crisis have been so abnormally high that they have essentially eaten all of the possible returns for...