Investing in Stocks Over the Next 10 Years is Going to get Difficult

Investing in stocks over the next 10 years is going to get difficult for buy and sell Investors

According to Barry Bannister, chief equities strategist at Stifel, the coming decade will not be as simple for US stock market investors as the previous one was. Instead of the S&P 500’s compounded annual rate of return of more than 13% in the 2010s, investors should expect a lost decade ahead, with returns of 0% in the US stock market from the end of 2021 to the end of 2031, according to Bannister, who spoke with Insider on Wednesday.

While millions of investors who were introduced to the stock market for the first time during the COVID-19 pandemic were conditioned to expect new highs following every sell-off, it’s not
impossible.

High valuation measures, a local high in the percentage of stock ownership among families, and the potential for major geopolitical threats all contribute to Bannister’s forecast for low stock market returns in the future. “We’ll have [supply chain] disruptions, geopolitical rivalries, fiat currencies, indebted governments, populism, and [profit] margin and regulatory pressure as long as the rules of supply and demand persist,” Bannister added.

Some of this has already begun to play out in 2022, with Russia’s war on Ukraine escalating geopolitical tensions to unprecedented levels. Supply chain problems have worsened as a result of the invasion, with major price increases in everything from to to .

“The freezing of Russian reserves, in my opinion, was as significant as Nixon’s removal of the US from the standard in 1971. This signaled to the rest of the world that they needed to find new reserve currencies for their assets.” If Bannister is true, foreign currencies such as the Chinese yuan might benefit at the expense of the US dollar.

China’s invasion of Taiwan, which Bannister feels is a foregone conclusion, might exacerbate geopolitical tensions. “Xi Jinping would not die without trying [for Taiwan],” Bannister said, adding that given his age, a move against Taiwan is likely by the end of this decade.

So, how might investors make a profit over the next ten years? According to Bannister, merely buying and holding the S&P 500 index, which has performed admirably since 2009, is not the solution. “In bull markets, buy and hold is the best strategy…but in bear markets, being in the index will not yield a good return.

Passive investors would bear the brunt of the losses “Bannister remarked. Rather, investors should focus on real and alternative assets, such as commodities, real estate, and hedge funds’ more active long/short stock selecting techniques. According to Bannister, value equities should outperform growth stocks in the equity market, while international stocks are likely to outperform US stocks.

In the short term, Bannister acknowledges that the has the capacity to rise, with a possible relief rally to 4,600 points. But, as in the aftermath of the dot-com bubble, those rallies should be sold rather than bought, because a 20% counter-trend rally in the market is possible during a broader downtrend.