Link: Federal Reserve – Low Equity Returns Expected

A new Federal Reserve paper highlights the painful truth: Real, inflation-adjusted, annual equity returns are not 7% as many people model, but 4-5.5%, and these annual returns have declined by 2% over the last 40 years.

Of course small-value has a 2-3% premium over that, but not without risk.

All of this is evidence for over-weighting high-yield fixed income, our approach for the tough decade ahead.