Apollo Global Management is projecting that investors may earn essentially zero real returns from the SP500 over the next ten years.
We are conditioned to believe US equities always bounce back and keep compounding.
But history shows that long flat or negative decades do happen even in major developed markets.
Japan is the clearest example.
From 1990 to 2010 the Nikkei 225 delivered an annualized return of about minus 4.5 percent.
That was not a short downturn.
It was two full decades where buy and hold did not work the way people expected.
Apollo’s argument is largely valuation driven.
When forward price to earnings ratios are elevated future returns tend to compress.
The data shows a strong relationship between starting valuation and ten year outcomes and at current levels that math points toward very low returns.
Thoughts??