Does Arithmetic Doom Stock And Bond Returns? Financial Advisors' Daily Digest

by: SA Gil Weinreich

Summary

Jim Sloan explains why the huge stock and bond bull markets have pulled future cash flow into the present, sharply constraining future returns.

Popular blogger Roger Nusbaum turns 50 and considers what he wants to do when he grows up.

Richard Thaler, a founder of the field of behavioral economics, writes new book, “Misbehaving”.

Today we digest the 2016 market seesaw that whitened the knuckles - if not the hair - of many an investor. Why? Mainly because of the coincidence of some compelling thought on this topic.

Former advisor Jim Sloan gives voice to a widely held grim view that markets are due to retreat. He sees it as mathematical, at least for bonds:

"The recent bond returns are unrepeatable. Why? The yield of the 10-year Treasury is under 2%. You have less than 2 points to go. You might get that 2% in several forms, with immediate cap gains if rates fall to 1%, but 2% is it. It's what you will get to maturity. Again, this isn't opinion. It's arithmetic."

Sloan then goes into stocks' historically high valuations, concluding with the highly contested "this time it's different" thesis, i.e. don't expect average historical returns in the next cycle.

SA contributor Ronald Surz also reviews market history - specifically, the history of the past quarter; he shows there was money to be made, but retains his view that the U.S. stock market will lose 19% this year.

And, below, more insights for advisors on wealth management in today's news: