11/05/2019

Morgan Stanley Sees Sobering Outlook For Returns

A traditional fund likely will see an annual gain of just 2.8 percent

A weak environment for economic growth and inflation, paired with low bond yields, portend anemic returns from a typical stock-bond portfolio over the next decade, according to Morgan Stanley.

A traditional fund -- split 60 percent in equities and 40 percent in fixed income -- will see an annual gain of just 2.8 percent over that time, about half the average over the last two decades, the firm’s strategists estimate. That’s based on the S&P 500 Index returning 4.9 percent per annum and 10-year Treasuries handing investors 2.1 percent a year for a dollar-denominated investor.

Not only will the returns be below what investors are used to but lower sovereign-bond yields will dampen the ability of fixed-income securities to offset large declines in equities, they said.

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