The Market Return For The Next Decade

So what will the stock market return be going forward? John Bogle, founder of Vanguard Mutual Funds and proponent of index investing, recently stated that investors should only expect about a 4 percent annual return from the S&P 500 for the next decade. According to Bogle, he expects a 2 percent dividend yield and earnings growth of 5 percent, for a 7 percent return. However, he also expects the PE ratio on the S&P 500 to fall from its current level of 20 times earnings to 15 times earnings. This decrease in the PE ratio will cause a 3 percent decrease in stock prices, resulting in his estimate of a 4 percent annual return. So is Bogle right? Check back with us in 2025 and we will let you know.