Basically, the argument is that stock valuations are so high, that if they persisted, returns would be very low in the near future.Millennials should aim to set aside nearly half of their income for the future, according to Olivia S. Mitchell, professor of insurance/risk management and business economics & public policy, and executive director of Wharton’s Pension Research Council at the University of Pennsylvania. If you want to live off even half of your final salary in retirement, you need to save 40% of your income over the next 30 years, she says.
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Other experts agree. The economists at investing giant Vanguard predict that, over the next 10 years, annual U.S. stock market returns will likely average 3% to 5%. When you factor in inflation — which, luckily, Vanguard predicts will be below 2% — the real rate of return is expected to be under 3%.
Morningstar Investment Management predicts an even more meager return: 1.8% over the next 10 years for U.S. stocks, before adjusting for inflation. Meanwhile, perhaps the most pessimistic outlook comes from Boston-based asset management firm GMO, which expects real returns of -3.6% for U.S. large-cap stocks and -1% for small-cap stocks.
There is certainly a strong argument that equities returns will be lower in the future based on current valuations. Vanguard's estimate seems reasonable. I have no idea what spread/variability they are putting on it for their projections, assume the 2% real RoR is a midpoint.