John Bogle’s Stock Market Prediction

John Bogle recently got asked by Benzinga what kind of returns investors should expect over the coming decade. He assumed that investors owned a portfolio of 50% large stocks (index-fund based) and 50% bonds (U.S. government issued). He argued that he expects 5% earnings per share growth, 2% dividends, and -3% returns due to valuation compression from the S&P 500 as a whole. He expects the P/E ratio to switch from nearly 20x earnings to 15x earnings. This amounts to a 4% return from the stock portion of a portfolio.

With bonds, Bogle is predicting 3% annual returns over the next couple years. The implication is clear: Someone owning a portfolio equally stuffed with typical S&P 500 stocks and U.S. government bonds should expect 3.5% annual returns over the next ten years, and that may very well amount to 0% purchasing power gains when you include the effects of inflation, … Read the rest of this article!