Market Expectations for the Next 30 Years

Market Expectations for the Next 30 Years

As usual, there are many different scenarios being discussed at the moment. The COVID second wave, economic struggles, interest rate projections, more fiscal stimulus, corporate bankruptcies, and on and on we go. This is applicable to the world of traders, not investors. Investors don’t invest to make a quick buck. Long-term investors – which is a redundant term – invest because it is a prudent choice to expand capital over time, not overnight.

With all of the above uncertainties, it may be more important than ever to focus on the big picture. So, here is the big picture in three visuals followed by just one question.

A Review of Markets Over the Past 30 Years

It is amazing to me that over the past three decades (the average span of a typical retirement), the price return, earnings growth, and dividend growth have tracked quite nicely together. They have moved on an annual basis within two percent of each other, albeit with large variance on a year-by-year basis. See below.

These return figures include the second and third largest declines in the history of the U.S. market which added up to a flat decade in the middle of the period noted. This offers us a reminder of the long-term value that can still be achieved despite scary short-term uncertainties.

Global Population Growth

A 30,000-foot view of what our global population growth curve looks like might be helpful to imagine what the future might hold.

Here is a graph of global population growth since 1950 with projections into 2100.

We are currently approaching 8 billion people with projections taking us significantly higher over the decades to come. Since 1990, the global population increased from 5.3 billion to almost 8 billion today. Let this sink in as we approach visual number three.

The Ever-Growing Middle Class

This explosion in population growth is occurring while extreme poverty is being all but eradicated from the globe. Even as the global population exploded, extreme poverty levels fell from 36% of the global population down to just 10% with Sub-Saharan Africa making up a majority of where progress still needs to be made.

Now, let’s now connect these three seemingly disparate visuals together with a question.

My question is this:

If our global population is likely to continue expanding, and that population is a combination of newly-minted and veteran consumers, what do you think is likely to happen to the earnings, dividends, and total value of the Great Companies of America and the World over the course of your retirement?

I think that is rhetorical, but I will let you draw your own conclusions.

It is so easy to get lost in the doom and gloom of the daily news cycle. They talk about the markets in the literal span of “What’s happening in trading this afternoon?” and completely ignore the bigger picture.

I find that the more I focus on the larger global trends, the more difficult it is to be pessimistic about what might lie ahead over the next multi-decade period.


This post is not advice. Please see additional disclaimers.

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