15 year bear market ahead? Some think boomers will pull their cash from stocks
Fed Economists – “We see a 15 year Bear Market for Stocks”
The authors, Zheng Liu and Mark M. Spiegel have attempted to quantify the implications. Their principal conclusions:
We find that the actual P/E ratio should decline from about 15 in 2010 to about8.3 in 2025.
The model-generated path for real stock prices implied by demographic trends isquite bearish. Real stock prices follow adownward trend until 2021.
On the brighter side, as the M/O ratio rebounds in 2025 (BK: M/O = Baby Boomers die), we should expect a strong stock price recovery. By 2030, our calculations suggest that the real value of equities will be about 20% higher than in 2010.
These conclusions are just horrendous! The suggestion is that there is a 15-year bear market in front of us. Multiples will fall by 50%!! I loved the “good news” from the report, that stocks might be 20% higher than 2010, but we have to wait 20 years to see that improvement.