The Future of Stock Market Performance Expert Survey Reveals Underperformance Predictions for Next 5 Years

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Get exclusive insights into the future of stock market performance in an expert survey. Discover why 61% of experts are predicting underperformance in the next 5 years and what this could mean for the economy. Uncover the reasons behind their predictions and stay ahead of the curve in the ever-changing world of stock markets.

Discover the surprising results of a recent survey where 61% of experts predict that the stock market will underperform in the next 5 years. This article sheds light on the confusion experienced by many professionals as they witnessed a quick rebound in equities markets post the devastating global impact of the coronavirus pandemic. Uncover the reasons behind their predictions and gain insights into what this could mean for the economy.

Markets have mostly looked past the coronavirus pandemic, but a growing number of experts arent entirely convinced the bull market has returned.

Though half of investing professionals say equities are in a bull market, 11 percent are dubbing the current environment as a bear market while one-third say the recent market rally is something else. Thats according to Bankrates Second-Quarter Market Mavens survey, which polled 18 participants on where they see equities, Treasury yields and the broader environment heading over the next 12 months. The survey found record division and variation among forecasts.

The differing results reflect just how puzzled many experts have been while watching equities markets quickly rebound in the months since the coronavirus pandemic upended much of the world economy, putting tens of millions out of a job in the U.S. and forcing businesses, restaurants, bars, gyms, retailers and offices nationwide to close amid stay-at-home restrictions.

After erasing nearly three years of gains in March and plunging by more than 31 percent, the S&P 500 recovered most of its losses. Its still, however, about 6 percent below its all-time high.

Experts say the rally is unlikely to keep up with its current pace. The financial system has a long way to go after one of the worst crises in generations, with investors and firms likely juggling extraordinary uncertainty driven by the strength of the economys rebound, unprecedented Fed action and fears of a second wave of the virus.

There are a lot of cross currents that have made the crazy market what it is, says Kim Forrest, chief investment officer and founder of Bokeh Capital Partners. These unusual times are driving unusual markets.

forecast at a glance The Future of Stock Market Performance Expert Survey Reveals Underperformance Predictions for Next 5 Years

Key takeaways:

  • S&P 500 expected to gain just 1 percent over the next 12 months.
  • Experts see below-average stock market returns over the next five years.
  • Market professionals are divided on the outlook, but prefer growth stocks over value stocks.
  • 10-year Treasury yield is likely to rebound but still hold near record lows.


S&P 500 seen as gaining 1 percent over next 12 months

Even with equity markets taking off for the races, experts in Bankrates survey say there might not be much more room left for them to run.

Market professionals average forecast for the S&P 500 shows the index closing at 3,127.33 when the second quarter of 2021 ends, suggesting a less than 1 percent rise from where it closed on June 30, when the survey period closed. Within the results, about 28 percent of survey participants expect that the index will close lower than where it was when the poll ended.

Experts showed wide division in their forecasts, with respondents forecasting the index to close as low as 1,950 and as high as 3,450. The median forecast showed the S&P 500 closing at 3,275 a year from now.

When you look back at past market cycles, equity markets tend to bottom about four months before the economy, says Michael Sheldon, CFA, chief investment officer and executive director at RDM Financial. If you wait too long, all the good news will be priced in.

sandp market mavens 2 The Future of Stock Market Performance Expert Survey Reveals Underperformance Predictions for Next 5 Years

Whats causing the modest forecasts? Experts say stocks are starting from a relatively healthy position, making it less likely for them to surge. In the prior quarters survey, experts expected stocks to rise by about 22 percent to 3,093.33 points, with every investing professional expecting gains. Markets already blew past those expectations.

Yet, fears of a second wave arent helping the picture, nor are worries that the virus hasnt been contained. The 2020 elections are also approaching, causing unprecedented uncertainty.

Among the biggest investor unknowns yet to be resolved are the economys performance and the search for effective COVID-19 treatments and vaccines, says Mark Hamrick, Bankrates senior economic analyst. Hanging in the balance is the performance of businesses of all kinds which helps drive stock prices. The fall election is also a source of uncertainty suggesting investors might want to stay buckled up.

Expect lower stock market returns over next five years, experts say

market mavens graphic 3 1 The Future of Stock Market Performance Expert Survey Reveals Underperformance Predictions for Next 5 Years

Even when the coronavirus-induced recession ends, its devastating effects wont be in the rearview mirror anytime soon.

Most experts (or 61 percent) say stock market returns over the next five years will be below their historic average. More than a quarter (28 percent) say returns should be about the same, while just 6 percent say results should be higher than normal. One respondent selected uncertain or no answer.

That represents a large shift from the prior survey, when no investing professional said stock returns would be lower than their historic average. Instead, 3 in 4 experts (or 75 percent) said stock returns over the next five years would be higher than normal, while 25 percent said results should be about the same.

We are starting from relatively high valuations and will be in a slow growth environment due to large debt overhang, says Bob Phillips, managing member of Spectrum Management Group. That will compress the return from stocks.

Market professionals divided on global, domestic stocks outlook, but prefer growth stocks

Bankrates survey suggests that investors might want to start looking at stocks outside of the U.S.

Experts were divided on whether domestic or global stocks would provide the best returns, though a growing number of experts were inclined to put more weight in the latter compared with prior surveys. About 2 in 5 (or 39 percent) say U.S. stocks will be the best, while another 39 percent preferred global stocks. Roughly 1 in 5 (or 22 percent) say returns will be about the same. That compares to the strong sentiment that professionals had toward U.S. stocks in the first quarter survey, with 4 of 5 respondents preferring that investment option.

The Feds interventions might be a reason for that divide. Some experts say the U.S. central banks whatever-it-takes policy is inflating asset prices, while others say its reducing risks associated with investing.

The Federal Reserve will buy up the universe, so there is reduced risk in the markets, in my opinion, says Ken Moraif, senior retirement planner at Retirement Planners of America.

But if youre going to look toward any kind of stock for a valuable return, experts are in agreement that growth stocks will fare the best in the year ahead. About 7 of 10 (or 72 percent) of respondents say that option will be the best, compared with 11 percent who favored value stocks and another 11 percent saying results will be the same. One respondent didnt provide an answer.

market mavens 4 The Future of Stock Market Performance Expert Survey Reveals Underperformance Predictions for Next 5 Years

Thats all because growth stocks are expected to be the better option for weathering a low-rate, low-growth environment.

The U-shaped economic recovery should favor companies that can grow earnings despite the macro backdrop, says Ed Clissold, chief U.S. strategist at Ned Davis Research. Almost by definition, those are growth stocks.

10-year Treasury yield should rebound, but still hold near record lows

market mavens 5 1 The Future of Stock Market Performance Expert Survey Reveals Underperformance Predictions for Next 5 Years

But experts were unanimous about one aspect of timing the market: Youre not too late on locking in a lower mortgage rate.

The 10-year Treasury yield — which serves as a benchmark for the 30-year fixed mortgage rate — is likely to hold below 1 percent over the next 12 months, though rising slightly from where it closed on June 30: 0.65 percent.

The average of the forecasts is 0.86 percent, according to the survey, with 0.50 percent at the low end of the range and 1.25 percent at the high end.

Thats significantly below prior survey periods. The average forecast among experts in the first quarter of 2020 showed the benchmark rate reaching 1.39 percent by the end of Q1 2021, and in the fourth quarter of 2019, experts saw a much higher rate of 2.14 percent looking ahead to the end of 2020.

Why the drop in forecasts? Its just because interest rate and growth expectations over the next few years have fallen, driven by the rise in unemployment and the Fed taking borrowing costs down to zero.

It is going to take a number of years to get back to low unemployment and the same levels of GDP growth we saw over the past few years, says Matt Nadeau, CFA, wealth advisor at Piershale Financial Group.

Bottom line

Even amid that uncertainty, experts were largely in agreement that a market rally is to be expected. Its driven by two factors: An in Fed, we trust ideology, as well as a tunnel-vision view toward the light at the end.

The stock market is looking past this tough time to better days ahead. In brief, its looking to 2021, and peeking into 2022 even, when it expects a COVID vaccine to be in circulation and the economy to be back to its pre-COVID self, says Patrick OHare, chief market analyst at Until then, it is placing its confidence in the idea that the Feds policy support will see us through to the other side.

But 2020 is far from over yet. Even with the presidential elections, the economys rebound and the path of the virus hanging in the balance, investors should remain focused on the long-term, steering away from trying to time the market while tuning out the short-term volatility and noise.

To the extent that most Americans are exposed to the market for the sole purpose of saving for retirement, the lesson is to focus on the long-term and to avoid reacting on emotion, Hamrick says. Investors can extract some comfort from the powerful support being given to the markets from the Federal Reserve and other major central banks. Weve now witnessed two financial crises over the past decade or so where the Fed seemed to make the difference in helping to put the stock market on firmer footing. The mantra seems to hold true for investors: Dont fight the Fed.


Bankrates second-quarter 2020 survey of stock market professionals was conducted from June 24-30 via an online poll. Survey requests were emailed to potential respondents nationwide, and responses were submitted voluntarily via a website. Responding were: Shannon Saccocia,  chief investment officer, Boston Private; Dec Mullarkey, managing director, investment strategy, SLC Management; Bob Phillips, managing member, Spectrum Management Group; Patrick J. OHare, chief market analyst,; Ed Clissold, chief U.S. strategist, Ned Davis Research; Michael Sheldon, CFA, FRM, chief investment officer and executive director, RDM Financial; Marilyn Cohen, CEO, Envision Capital Mgmt. Inc.; Sam Stovall, chief investment strategist, CFRA Research; Kim Forrest, chief investment officer/founder, Bokeh Capital Partners; Matt Nadeau, CFA, wealth advisor, Piershale Financial Group; Chuck Self, chief investment officer, iSectors; Ken Moraif, senior retirement planner, Retirement Planners of America; Michael K. Farr, president and chief executive officer, Farr, Miller & Washington, LLC; C.J. MacDonald, client portfolio manager, GuideStone; Robert A Brusca, PhD, chief economist, Fact and Opinion Economics; Wayne Wicker, CIO, Vantagepoint Investment Advisers; Brian Nick, chief investment strategist, Nuveen; and Chuck Carlson, CFA, CEO, Horizon Investment Services.

Featured image by Getty Images; Illustration by Bankrate.

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