Monday, October 21, 2013

New Normal Low Return World

Living in a low return world | Abnormal Returns: " . . . Two points. The first is that technology and demography are not destiny. One can come up with any number of scenarios (good and bad) that would disturb this trend towards lower returns. The second is that a low-return world has huge implications for personal financial planning for society as a whole. US pension plans continue to project what seem to be too-high nominal financial market returns. If investors, both large and small, are unable to generate a return on their savings then it may be the case that savings, in addition to lifestyle changes, need to occur to allow for comfortable retirements. As Bernstein notes technology certainly plays a positive role here but so would a mandatory savings regime. These trends are longer term in nature and much will happen in the meantime to perturb financial markets. However as you go about thinking about working and financial lives keep in mind that while much in our lives has improved we cannot assume that financial market returns will provide us with abundant returns to boot."

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