A new gloom has descended on some of America's best investment advisors.
Bill Bengen, known for his groundbreaking work on retirement withdrawal distributions, says we're ten years into a bear market that's likely to last another five or ten years.
Richie Lee, while insisting he is optimistic about the long-term future, says the economic malaise could be stretched out much longer than in normal economic cycles and he sees a "total lack of leadership from a political standpoint."
Robert Levitt, a globe-trotting advisor with investments worldwide, says he does not see how the U.S. will again become the engine of growth worldwide.
Jerry Gray says the best-case scenario is three to five years of malaise and mid-single-digit returns on stocks, but there is about a 20% chance of much worse.
Bill Carter, the most bullish of our panel, says stocks are likely to offer 6% to 9% annualized returns over the next five years but adds that any sudden unexpected shocks to the economy could easily derail the anemic recovery and cause another global tailspin.
You can dismiss such gloomy outlooks by saying that the consensus is always wrong. You can cling to American ingenuity and say we will find a way out of this mess. But these are among the most respected independent advisors in the nation and the fact all of them are so skittish about the five-year outlook is troubling.
These advisors were last interviewed for a column I wrote for the April 2008 issue of Financial Advisor entitled, "America's Financial Crisis." "Is it just another bear market or a period marking the end of The American Century?" was the question I sought to answer. The advisors interviewed agreed that the then-unfolding recession had caused a situation that indeed was "different this time," and the story heralded their fears about the American economy. But no one predicted the near-collapse of the world's financial system that followed just six months later.
Now, these advisors sound more humble. That's to be expected. But what you might not expect this far into a recovery is their pessimism about the American economy and financial markets. Here is what they said.
William Bengen devised "the 4% drawdown rule," a thesis that took him years to research and articulate in a series of articles in the Financial Planning Association's Journal of Financial Planning. Based on historical data and asset allocation models, Bengen's research forms the bedrock of sustainable retirement withdrawal strategies used by many financial planners. If Bengen was concerned 30 months ago, he is fearful now-even with stocks 30% off their all-time highs.