Squaring the Views of Bogle, Gross and BlackRock's Fink

On the surface, it seems that three of the best and most trusted names in finance are decidedly at odds with one another

Don Phillips 23 October, 2012 | 4:20PM

BlackRock's Larry Fink says be 100% in equities. PIMCO's Bill Gross claims equities are dead. Vanguard's Jack Bogle preaches stay the course with a balanced portfolio. To read the headlines, it seems that three of the best and most trusted names in finance are decidedly at odds with one another. In truth, their forecasts are far more similar than dissimilar.

The shared message of these three veteran market observers is that current conditions warrant sober expectations for returns from both stocks and bonds. None expects equity returns to rival the 6.6% real return demonstrated over much of the past century and immortalised in Jeremy Siegel's Stocks for the Long Run. None expects bonds to produce returns much in excess of their current coupon, so a return of less than 2% on the Barclays Aggregate Index is probable. All three expect bonds to be significantly more volatile in the future and to be particularly vulnerable to government attempts to manage excess debt through inflation. 

In short, all see tougher times for financial assets. The easy days of the bull market of the 1980s and 1990s are gone. The markets won't do the heavy lifting to grow investors' portfolios. Instead, investors will need to work longer, save more and invest smarter (and more cost efficiently, Bogle would hasten add) in order to meet their goals. It's a sobering and valuable message, one echoed by Jeremy Grantham and many other astute investors. 

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About Author

Don Phillips  is a managing director at Morningstar and Morningstar’s president of fund research.

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