Morningstar "2024 Edition" summary of CMAs (by Benz) now available at:
https://www.morningstar.com/portfolios/experts-forecast-stock-bond-returns-2024-edition
Average nominal return of the companies listed in the chart from Morningstar (see previous post):
US Equities = 5.37%
Developed Markets = 8.32%
(Not sure if their numbers include dividend reinvestment.)
US Agg Bond = 5.15%
97 year nominal average return for S&P 500 including reinvesting dividends = 9.7%
Real return = 6.5%
Developed (ex USA) nominal average return since 1970 = 9.4%
https://mindfullyinvesting.com/historical-returns-of-global-stocks/
12 Lessons the Market Taught Investors in 2023 (Morningstar)
Lesson 1: No One Is Very Good at Consistently Getting Market Forecasts Right
"The only value in market strategist forecasts is that they show that a wide dispersion of outcomes is possible. The S&P 500 ended 2022 at 3,839.50. The forecasts of 23 analysts from leading investment firms for year-end 2023 ranged from as low as 3,650 (down 5%) to as high as 4,750 (up 24%). The average forecast was for the S&P 500 to end the year at 4,080 (up 6%). It closed the year up 26.4%.
The lesson is that investors are best served by following Warren Buffett’s advice on guru forecasts: “We have long felt that the only value of stock forecasters is to make fortunetellers look good. Even now, Charlie [Munger] and I continue to believe that short-term market forecasts are poison and should be kept locked up in a safe place, away from children and also from grown-ups who behave in the market like children.”
The lesson is an especially important one because investors, like all humans, are subject to confirmation bias. Thus, when we hear a forecast that confirms our own beliefs or concerns, we are more likely to act on it than if we hear a contrary opinion."
https://www.morningstar.com/markets/12-lessons-market-taught-investors-2023
A 12% retirement return assumption is ‘absolutely nuts,’ expert says. Here’s a realistic rate to expect
As promised, I will keep tabs on the prediction that the big boys have made over the past couple years that foreign developed markets will outperform the US market over the next 10 years. I'll start with 2023 performance and will update each year going forward:
US Stock Market/Bonds Inter. Developed Stocks/Global Bonds
Q4 2023 12.07% 6.82% 10.51% 5.36%
1 year (2023) 25.96% 5.53% 17.94% 8.32%
So far the US equity market is winning 🤑.
Determining your asset allocation will obviously depend on where you think tax rates will go in the future. US debt will likely play into that. So where is the national debt now and how did we get there: https://finance.yahoo.com/news/whos-to-blame-for-the-national-debt-how-about-everybody-132241598.html
"We asked the budget hawks at the Committee for a Responsible Federal Budget (CRFB) to help identify the specific laws and other programs that have pushed the debt to unmanageable levels. As CRFB points out, the US government actually ran a surplus (for the last time) in 2001, and the budget outlook was upbeat. The Congressional Budget Office (CBO) projected that, on the trajectory at the time, the whole federal debt would be paid off by 2009.
Then came 23 years of tax cuts and spending hikes that in retrospect look like fiscal insanity, pushing the amount of federal debt held by the public from $3.3 trillion in 2001 to $26.3 trillion at the end of fiscal 2023. There’s another $7 trillion in “intra-governmental debt” held by government agencies such as the Social Security Trust Fund, with the total national debt hitting $34.2 trillion as of Feb. 1, 2024. For this analysis, we’re addressing the amount of publicly held debt, which represents all the Treasury securities traded in financial markets.
CRFB finds that 77% of the actions accounting for all the new debt since 2001 were bipartisan, with meaningful support from both Democrats and Republicans. Much of that was fiscal stimulus following the 2008 financial crash and the outbreak of COVID in 2020. Partisan Democratic actions — mostly spending hikes — account for 12% of that additional debt, while partisan Republican changes — mostly tax cuts — account for 8%."
One way to lower the national debt is to give the IRS the resources it needs to collect taxes: https://www.msn.com/en-us/money/taxes/irs-expects-to-collect-hundreds-of-billions-more-in-overdue-and-unpaid-taxes-thanks-to-new-funding/ar-BB1hSCiz
"WASHINGTON (AP) — The IRS is poised to take in hundreds of billions of dollars more in overdue and unpaid taxes than previously anticipated, according to new analysis released Tuesday by the Treasury Department and the IRS.
Tax revenues are expected to rise by as much as $561 billion from 2024 to 2034, thanks to stepped-up enforcement made possible with money from the Democrats’ Inflation Reduction Act, which became law in August 2022.
The Congressional Budget Office in 2022 estimated that the tens of billions of new IRS funding provided by the IRA would increase revenues by $180.4 billion from 2022 to 2031. The IRS now says that if IRA funding is restored, renewed and diversified, estimated revenues could reach as much as $851 billion from 2024 to 2034.
Administration officials are using the report to promote President Joe Biden's economic agenda as he campaigns for reelection — and as the IRS continually faces threats to its funding.
“This analysis demonstrates that President Biden’s investment in rebuilding the IRS will reduce the deficit by hundreds of billions of dollars by making the wealthy and big corporations pay the taxes they owe," National Economic Adviser Lael Brainard said in a statement.
“Congressional Republicans’ efforts to cut IRS funding show that they prioritize letting the wealthiest Americans and big corporations evade their taxes over cutting the deficit," Brainard said."
