Taking The Mystery Out Of Forecasting 10-Year Returns For The S&P 500

About: SPDR S&P 500 Trust ETF (SPY), Includes: IVV, SDS, SH, SPXU, SSO, UPRO, VOO
by: Jonathan Selsick
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Jonathan Selsick
Research analyst, Asset manager, newsletter provider, portfolio strategy

With a wide range of future return forecasts from the experts and limited insight into their assumptions, it’s difficult to assess which forecast is more realistic.

We will make projecting 10-year returns accessible to everyone, in a simple spreadsheet which you can experiment with and visualize the outcomes.

There are two components of future returns; dividends and sale proceeds - which are determined by estimating six key drivers of these two components.

These six drivers are real GDP growth, inflation, change in profit margins, change in 10-year rate, change in the equity risk premium and change in the dividend payout ratio.

Based on our estimates of these factors, the current 10-year total return estimate is 1%. Enter your own estimates and see the implied return forecast.

With varied forecasts from the experts - who should you believe?

There are reliable bootstrap methods to estimating long-term returns to the S&P 500, such as the CAPE ratio or market cap to GDP ratio