Experts Forecast Stock and Bond Returns: 2024 Edition (2024)

Better things lie ahead for bonds, but the prospects for stocks, especially U.S. equities, are less rosy.

Those were the recurring themes among the capital markets assumptions provided by major investment firms as 2023 wound down.

In contrast with the major firms’ capital markets assumptions released toward the end of 2022, when declining equity prices and higher interest rates buoyed the prospects for both stocks and bonds, the 2023 equity market rally diminished most firms’ return assumptions for U.S. stocks. Meanwhile, last year’s continued interest-rate hikes have contributed to higher forward-looking return prospects for bonds and cash. And firms’ outlooks for non-U.S. stocks, a persistent bright spot in my annual compendium, continued to be more robust than their expectations for companies domiciled stateside, thanks largely to foreign stocks’ valuation advantage.

How to Use the Forecasts

Although it’s reasonable to be skeptical about predicting the market’s direction, especially over the short term, the fact is that you need to have some type of return expectation in mind when you’re creating a financial plan. If you can’t plug in a long-term return assumption, it’s tough to figure out how much to save and what sort of withdrawal rate to use once you retire. Long-term historical returns are one option. But at certain points in time—like 2000 or early 2022—they might lead to overly rosy planning assumptions, which in turn might lead you to save too little or overspend in retirement.

To draw some conclusions about what sorts of return assumptions might be reasonable for planning, I have been amalgamating investment firms’ capital markets assumptions at least once a year. Firms use different methodologies to arrive at their capital markets assumptions, but most employ some combination of current dividend yields, valuation, and earnings-growth expectations to guide their equity forecasts. Fixed-income return assumptions are more straightforward given the tight historical correlation between starting yields and returns over the next decade. That explains why you see more uniformity among firms’ fixed-income return expectations, with variations driven largely by time-period differences.

Before you take these or any other return forecasts and run with them, it’s important to bear in mind that these return estimates are more intermediate-term than they are long-term. The firms I’ve included below all prepare capital markets forecasts for the next seven to 10 years, not the next 30. (BlackRock and Vanguard do provide 30-year forecasts as well as 10-year, and Fidelity’s capital markets assumptions apply to a 20-year horizon. But they’re outliers in terms of making such far-reaching forecasts available to the public.) As such, these forecasts will have the most relevance for investors whose time horizons are in that ballpark, or for new retirees who face sequence-of-return risk in the next decade.

It’s also important to note that the parameters for these return estimates vary a bit; some of the return expectations are inflation-adjusted, while others are not.

Expert Forecasts for Long-Term Asset-Class Returns

Experts Forecast Stock and Bond Returns: 2024 Edition (1)

BlackRock

Highlights: 5.2% 10-year expected nominal return for U.S. large-cap equities; 9.9% for European equities; 9.1% for emerging-markets equities; 5.0% for U.S. aggregate bonds (as of September 2023). All return assumptions are nominal (non-inflation-adjusted).

BlackRock’s equity return expectations in September 2023 were quite a bit lower than they were the year prior. For example, the firm was expecting a nearly 9% 10-year return for U.S. equities in September 2022 but just over 5% a year later. The firm’s return assumptions for non-U.S. stocks have also come down since last year but are still notably higher than its U.S. equity return assumptions: nearly 10% for European equities and 9% for emerging-markets equities.

In line with 2023′s rising yields, the firm’s outlook for bond returns increased from 2022. BlackRock’s models call for a 5.0% expected 10-year return from U.S. aggregate bonds versus 4.2% in 2022 and less than 2.0% in 2021.

Fidelity

Fidelity’s capital markets assumptions employ a 20-year horizon (2023-42) and therefore can’t be stacked up neatly against the 10-year returns from other firms in our survey. In addition, the firm states its capital markets assumptions in real (inflation-adjusted) terms; its 2024 base-case inflation rate over the 20-year horizon is 2.7%. Finally, the firm’s assumptions are based on data as of April 30, 2023, so they don’t factor in stocks’ strong gains in the last eight months of 2023.

The firm is forecasting a 3.9% real return for U.S. equities over the next 20 years. That’s higher than Fidelity’s 20-year real return forecast of 3.0% for U.S. stocks last year, but substantially lower than U.S. stocks’ actual real returns of 7.3% since 2003. Fidelity cites elevated equity valuations (again, as of April 2023) as the main constraint on U.S. equity gains relative to their gains over the past 20 years. The firm expects the 20-year real returns on non-U.S. stocks to be roughly in line with U.S. (3.9%), but accords substantially higher return prospects to developing markets—a 5.4% real return over the next 20 years.

On the fixed-income side, the firm was forecasting 2.1% 20-year real returns for the Bloomberg U.S. Aggregate Bond Index as of April 2023.

Grantham Mayo Van Otterloo

Highlights: Negative 2.6% real returns for U.S. large caps over the next seven years; 1.9% real returns for U.S. bonds (as of November 2023).

As one might expect from a valuation-conscious firm after a stock market rally, GMO’s return expectations for stocks generally declined over the past year. The firm is expecting negative 2.6% real returns for U.S. large caps over the next seven years, down from its negative 0.7% real (inflation-adjusted) return forecast in 2023. Consistent with previous forecasts, the firm’s outlook for non-U.S. stocks is brighter than its expectation for U.S. names: The seven-year real return forecast for international large caps is 2.3%; 4.4% for international small-caps; 4.7% for emerging-markets equities; and a whopping 6.3% for emerging-markets value stocks.

The firm’s outlook for bonds looks better than its late-2022 number: a 1.9% real return for U.S. bonds (up from 0.6% in 2022) and a 4.4% real return forecast from emerging-markets bonds.

J.P. Morgan

Highlights: 7.0% nominal returns for U.S. large-cap equities over a 10- to 15-year horizon; 4.6% nominal returns for 10-year Treasury bonds and 5.8% nominal returns for U.S. investment-grade corporate bonds over a 10- to 15-year holding period (as of Sept. 30, 2023).

J.P. Morgan’s expectation for equities’ returns over the next 10 to 15 years declined from its September 2022 numbers: Owing to higher valuations, its forecast for U.S. large caps dropped to 7.0% from 7.9% and to 7.2% from 8.1% for U.S. small caps. The firm’s outlook for non-U.S. equities generally declined, too, though its 10- to 15-year outlook for eurozone equities was a robust 8.0%, and for emerging-markets equities it was 8.9%. More broadly, its equity return projections were higher than most of the firms in our survey.

On the fixed-income side, the firm nudged up return expectations thanks largely to the higher yields on offer today: It’s expecting a 4.6% return from 10-year Treasuries, up from 4.0% last year, and 5.8% nominal returns from U.S. investment-grade corporates, up from 5.5% in late 2022. One exception is that the firm’s expectations for high-risk bond types declined slightly. The firm’s 10- to 15-year forecast for high-yield bonds is 6.5% for 2024, down from 6.8% for 2023, and its forecast for emerging-markets sovereign bonds dropped to 6.8% from 7.1%.

Morningstar Investment Management

Highlights: 4.6% 10-year nominal returns for U.S. stocks; 4.3% 10-year nominal returns for U.S. aggregate bonds (as of Dec. 31, 2023).

Following a major U.S. market rally in 2023, Morningstar Investment Management’s 10-year equity outlook dropped relative to where it was in late 2022. In line with previous years’ assumptions, MIM’s outlook for non-U.S. stocks is substantially better: 7.4% for developed-markets stocks overseas and an impressive 9.5% for emerging-markets equities.

Like most of the forecasts, MIM’s return expectations for bonds have jumped to reflect higher yields. It assumes a 4.3% 10-year nominal return for U.S. aggregate bonds and 5.3% for U.S. high yield.

Research Affiliates

Highlights: 4.0% nominal (1.5% real) returns for U.S. large caps during the next 10 years; 4.8% nominal (2.3% real) returns for U.S. aggregate bonds (as of Dec. 31, 2023; valuation-dependent model).

On the heels of U.S. stocks’ rally in 2023, Research Affiliates’ 10-year U.S. market return expectations declined, from a nearly 6% nominal return projection for U.S. large caps at the end of 2022 to just 4% at year-end 2023. In fact, the firm is expecting U.S. aggregate bonds to outperform stocks over the next decade, and its expected volatility for bonds is also substantially lower. The firm accords a return edge to small-cap stocks: a 7.2% 10-year annualized return. Consistent with past forecasts, the firm is expecting better things from non-U.S. stocks: a 9.0% 10-year annualized return (6.5% real) for developed-markets stocks outside the U.S. and 9.9% (7.4% real) for emerging-markets equities.

Schwab

Highlights: 6.2% nominal returns for U.S. large caps during the next 10 years; 5.7% nominal returns for U.S. investment-grade bonds (as of Oct. 31, 2023).

Schwab bucked the trend toward lower expected equity returns and nudged up its 10-year return expectation for U.S. stocks as of its most recent forecast, to 6.2% versus 6.1% a year ago. The firm’s outlook for non-U.S. large caps remained in line with last year’s forecast: 7.6%.

In line with the outlook from other investment providers, the firm is forecasting a 5.7% gain in 2024 for U.S. investment-grade bonds, versus 4.9% last year and 2.3% in 2022. (All figures are nominal.) Schwab’s 10-year return expectations are well below each asset class’ returns from 1970 through October 2023.

Vanguard

Highlights: Nominal median U.S. equity market return of 4.2% to 6.2% during the next decade; 4.8%–5.8% median expected return for U.S. fixed income (as of Sept. 30, 2023).

Vanguard’s latest U.S. equity market return forecast is a touch below where it was a year ago. (The firm presents its forecasts in a range.) The new forecast calls for U.S. equity gains of 4.2% to 6.2% over the next decade, versus 4.7% to 6.7% a year ago. Its non-U.S. equity return forecast (7.0%–9.0%) is roughly unchanged and substantially higher than the U.S. return expectation. Vanguard provides sub-asset-class forecasts, too. In its most recent run, its 10-year return forecast for value stocks (4.8%–6.8%) was substantially higher than its outlook for growth names (1.2%–3.2%). The firm is also expecting small-cap stocks to best large caps: The range for the former was 4.9% to 6.9%, versus 4.2% to 6.2% for the latter.

Vanguard’s return expectations for U.S. aggregate bonds are roughly the same as they were a year ago. The firm is expecting better returns—albeit with higher volatility—from lower-quality bonds: a range of 6.3% to 7.3% for U.S. high-yield bonds and 6.4% to 7.4% for emerging-markets bonds.

Where to Find Stocks to Buy in 2024

After 2023's market rally, there are fewer opportunities for stock investors today. Here's where to look.

10m 43s

The author or authors do not own shares in any securities mentioned in this article.Find out about Morningstar’s editorial policies.

Experts Forecast Stock and Bond Returns: 2024 Edition (2024)

FAQs

What is the stock market forecast for 2024? ›

Analysts expect S&P 500 profits to jump 8% in 2024 and 14% in 2025 after subdued growth last year, data compiled by BI show. The earnings forecast could be even higher next year in the event of zero rate cuts in 2024, said Andrew Slimmon, portfolio manager at Morgan Stanley Investment Management.

Which stock will boom in 2024? ›

Performance List of Multibagger Penny Stocks for 2024
NameBook Value1 Year (%)
J Taparia Projects₹ 18.56345.61%
Rasi Electrodes₹ 9.4552.90%
3P Land Holdings₹ 37.7524.68%
SAL Steel₹ 4.87110.65%
6 more rows
Apr 24, 2024

What are the experts forecast stock and bond returns? ›

Highlights: 5.2% 10-year expected nominal return for U.S. large-cap equities; 9.9% for European equities; 9.1% for emerging-markets equities; 5.0% for U.S. aggregate bonds (as of September 2023). All return assumptions are nominal (non-inflation-adjusted).

What are the experts saying about the stock market? ›

While there could be a growth slowdown in the first half of 2024, experts believe growth should resume in the second half of the year. Americans faced many financial challenges this year, from persistent inflation to increasingly expensive debt.

Will 2024 be a bull or bear market? ›

Economic growth actually accelerated above its 10-year average in 2023. That resilience, coupled with a fascination about artificial intelligence (AI), changed investors' collective mood. The S&P 500 soared throughout the year and finally reached a new high in January 2024, making the new bull market official.

What is the Dow prediction for 2024? ›

The bank's analysts give a positive forecast for the Dow Jones exchange rate in 2024. In their opinion, index quotes will increase by 10% to $40,000 in 2024. If the US economy avoids recession, growth could reach up to 19%. This scenario is more likely due to cooling inflation and stable GDP growth.

What is the best stock to buy for beginners in 2024? ›

Compare the best stocks to buy now
Company (Ticker)SectorMarket Cap
Broadcom (AVGO)Technology$622.87B
Meta Platforms (META)Communication services$1.12T
ServiceNow (NOW)Technology$148.60B
UnitedHealth (UNH)Healthcare$455.76B
1 more row

Which penny stock is best for 2024? ›

Top 10 Penny Stocks to Buy in India 2024
  • Comfort Intech Ltd. ...
  • Vikas Ecotech Ltd. ...
  • Globe Textiles. ...
  • GG Engineering Ltd. ...
  • Rajnandini Metal Ltd. ...
  • Growington Ventures India Ltd. ...
  • Indian Infotech and Software Ltd. ...
  • Accuracy Shipping Ltd. Accuracy Shipping Ltd provides a range of transportation and logistic services.
2 days ago

Will the market be better in 2024? ›

1. Positive returns -- but smaller than in 2023. I think that the overall stock market will deliver positive returns in 2024. However, I expect those returns to be somewhat smaller than they were last year.

Should I invest in bonds in 2024? ›

Positive Signals for Future Returns. At the beginning of 2024, bond yields, the rate of return they generate for investors, were near post-financial crisis highs1—and for fixed-income, yields have historically served as a good proxy for future returns.

How are bonds doing in 2024? ›

There are indications that interest rates may start to fall in the near future, with widespread anticipation for multiple interest rate cuts in 2024. Falling rates offer the potential for capital appreciation and increased diversification benefits for bond investors.

Should I invest in bonds right now? ›

Short-term bond yields are high currently, but with the Federal Reserve poised to cut interest rates investors may want to consider longer-term bonds or bond funds. High-quality bond investments remain attractive.

Should I pull my money out of the stock market? ›

It can be nerve-wracking to watch your portfolio consistently drop during bear market periods. After all, nobody likes losing money; that goes against the whole purpose of investing. However, pulling your money out of the stock market during down periods can often do more harm than good in the long term.

At what age should you get out of the stock market? ›

There are no set ages to get into or to get out of the stock market. While older clients may want to reduce their investing risk as they age, this doesn't necessarily mean they should be totally out of the stock market.

How high will the stock market be by 2025? ›

S&P 500 could hit 6,500 by end-2025, says Capital Economics.

Will 2024 be good for stocks? ›

Analysts project full-year S&P 500 earnings growth of 11.0% in 2024, but analysts are more optimistic about some market sectors than others.

Is 2024 a good time to invest? ›

Stocks and bonds may both be poised for success in 2024. Easing inflation and a pivoting Fed should reduce headwinds that have faced both asset classes in recent years.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Moshe Kshlerin

Last Updated:

Views: 5379

Rating: 4.7 / 5 (77 voted)

Reviews: 92% of readers found this page helpful

Author information

Name: Moshe Kshlerin

Birthday: 1994-01-25

Address: Suite 609 315 Lupita Unions, Ronnieburgh, MI 62697

Phone: +2424755286529

Job: District Education Designer

Hobby: Yoga, Gunsmithing, Singing, 3D printing, Nordic skating, Soapmaking, Juggling

Introduction: My name is Moshe Kshlerin, I am a gleaming, attractive, outstanding, pleasant, delightful, outstanding, famous person who loves writing and wants to share my knowledge and understanding with you.