Given that volatility, it’s unlikely that the last decade’s record earnings growth will spill into the next one. Unfortunately, investors can’t expect much more from the other two sources of stock returns. The dividend yield is likely to remain around 2%, which is roughly where it’s been for decades. And the 12-month trailing P/E ratio is roughly 24, which is 50% higher than its long-term average of 16, so future changes in the market’s valuation are more likely to eat into returns than enhance them.
Those sobering figures explain why most Wall Street firms expect U.S. stocks to deliver more muted returns during the next decade. It’s a good reminder that what appears in the rearview mirror is no indication of the road ahead.
Nir Kaissar is a Bloomberg Opinion columnist covering the markets. He is the founder of Unison Advisors, an asset management firm. He has worked as a lawyer at Sullivan & Cromwell and a consultant at Ernst & Young.