Don’t celebrate the Dow record too much, Morgan Stanley predicts dismal returns the next decade


The traditional investor portfolio — which is made up of 60% stocks and 40% bonds — will return just 4.1% over the next 10 years, Morgan Stanley strategist Andrew Sheets predicts using historical valuation analysis.

Such a low portfolio return would come after a decade of massive multiple expansion for stocks and a flood of money into fixed income as central banks ease monetary policy to re-spark economic growth.

The S&P 500 has returned 13.8% annually the last 10 years.

Valuation proves “far more accurate than any other variable in determining what the 5- or 10-year experience of an investor will be,” Sheets says.