Hope for the transformative power of technology has been behind much of the S&P 500 ‘s rally this year. And tech will be key in pushing the index the next 5,000 points higher—and to make stocks worth owning over safer assets, DataTrek Research says.
With the 10-year Treasury yielding 4.7%, there’s certainly an argument for owning bonds. Investors might be tempted to go all in on them—or even just to hold cash, given high interest rates—even if they know stocks will likely outperform in the long run. By adding the 10-year Treasury’s 4.7% yield to the 4.5% equity risk premium for U.S. large-cap stocks, Colas says the lowest annual compounded return that stock investors should accept over the next decade is 9.2%. If the S&P 500 does compound 9.2% annually over the next 10 years, it will reach 10,000 by 2033, Colas wrote Friday.
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