Morgan Stanley sees market returns tumbling over the next 10 years

SYDNEY: A weak environment for economic growth and inflation, paired with low bond yields, portend anaemic returns from a typical stock-bond portfolio over the next decade, according to Morgan Stanley. A traditional fund —split 60 per cent in equities and 40 per cent in fixed income —will see an annual gain of just 2.8 per cent over that time, about half the average over the last two decades, the firm’s strategists estimate.

That’s based on the S&P 500 Index returning 4.9 per cent per annum and 10-year Treasuries handing investors 2.1 per cent a year for a dollardenominated investor.

Not only will the returns be below what investors are used to but lower sovereign-bond yields will dampen the ability of fixed-income securities to offset large declines in equities, they said.