There is a broad consensus that equities are in a “low return environment”. Although such fears might have been expected following 2008’s bear market, it is surprising that the low-return rhetoric continues despite that the bull market is now more than 7 years old.
Fears that returns would be lower than normal have fostered grave misperceptions that have hurt overall portfolios’ performance. Despite investors’ fears, this cycle’s returns have actually been quite normal over various time horizons.
Chart 1 shows the distribution of all rolling 12-month total returns from December 1926 onward delineated by quintile. The most recent 12-month return of 12.6% looks normal, sitting just slightly below the median of 12.9%.
Richard Bernstein is chief executive and chief investment officer at Richard Bernstein Advisors.
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