What’s next for markets? A respected equity researcher’s five-year look-ahead provides the answer: “Not much.”
With the U.S. stock market hitting new highs lately, the question on everyone’s mind is, “What’s next?”I’ve previously published the projections of such luminaries as famed investor Warren Buffett and Nobel laureate Robert Shiller. Their formulas — and those of other experts — predict that the return of the S&P 500 SPX, -0.16% in the next 10 years will be far below the market’s long-term averages, or even negative, based on today’s relatively high valuations.
The news isn’t too good. Based on a formula that’s proven itself over the past 65 years, a new white paper by Mauboussin predicts that the S&P 500’s total return between now and the end of 2023 will be zero, as shown in the accompanying graph. When households have more than about 70% of their liquid assets in stocks, the market’s return eventually becomes negative. With the percentage now around 73%, the expected five-year return for the market is zero, according to Mauboussin.
Mauboussin isn’t some newbie researcher. Before he joined BlueMountain, he was head of global financial strategies at Credit Suisse and chief investment strategist at Legg Mason Capital Management. Mauboussin claims that individuals can only outperform the market if they have an edge in one or more of four different skills. He calls these behavioral, analytical, informational, and technical. He ties the whole set together with the acronym BAIT.
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