Stocks or bonds? Why financial experts predict lower returns for stocks.

Stocks or bonds? Why financial experts predict lower returns for stocks.

According to a report from amp.focus.de, concern among financial experts is increasing over the forecast for lower returns on stocks in the next few years. The adjustment of the capital market outlook of the major US bank J.P. Morgan and the seven-year forecast from the Boston fund company GMO show that the returns on stocks could fall significantly in the future. These forecasts have potentially far-reaching implications for the market and the financial industry.

J.P.'s 3-year forecast Morgan suggests stocks will deliver low returns amid increased volatility over the next three years. This could lead to institutional investors increasingly switching to safe assets such as bonds in order to achieve stable long-term returns. GMO's seven-year forecast underlines this development, as it sees all equity markets below their long-term average of 6.5 percent per annum, while emerging market bonds generate a comparable return to international small caps.

The 10-year forecast, based on the Shiller P/E ratio, suggests stocks could return only about four percent over the next decade, roughly equivalent to the current yield on a 10-year U.S. Treasury note. This leads to institutional investors increasingly relying on bonds because they offer similar returns to stocks but are associated with less price risk.

Given these forecasts and the possible impact on investors, it is advisable to include long-term bonds with high coupons in the portfolio. This does not mean getting out of stocks, but rather adding bonds to the portfolio to spread risk and achieve stable returns over the long term.

The bond market offers various options for retail investors to invest in bonds, including federal bonds, corporate bonds and bond funds. It is advisable to inform yourself about the different options and diversify accordingly in order to potentially benefit from the forecast development.