Global Market Return Forecast Revised Up, But US Stocks Lag: Time to Diversify?

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Stocks Analysis by James Picerno covering: . Read James Picerno's latest article on Investing.com

. Today’s revised forecast indicates a 6.9% annualized return for the unmanaged benchmark, which holds all theUS equities are still the outlier for expected return among the various asset classes. The average forecast for American shares is well below the trailing 10-year performance. As a result, US equities are on track to generate materially softer results relative to realized performance over the past decade.

It’s likely that some, most or possibly all of the forecasts above will be wide of the mark in some degree. GMI’s projections, however, are expected to be somewhat more reliable vs. the estimates for its components. Predictions for the specific markets are subject to greater volatility and tracking error compared with aggregating the forecasts into the GMI estimate, a process that may reduce some of the errors through time.

Here’s a brief summary of how the forecasts are generated and definitions of the other metrics in the table above:The Building Block model uses historical returns as a proxy for estimating the future. The sample period used starts in January 1998 . The procedure is to calculate the risk premium for each asset class, compute the annualized return and then add an expected risk-free rate to generate a total return forecast.

 

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