The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: AdrianC on July 14, 2016, 08:33:24 AM
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Jason Zweig
http://blogs.wsj.com/moneybeat/2016/07/13/sorry-youre-just-going-to-have-to-save-more-money%E2%80%8B/
Since 1913, U.S. stocks have gained an annual average of 9.3% when interest rates fall, but only 2.3% in periods of rising rates, according to finance researchers Elroy Dimson of Cambridge Judge Business School and Paul Marsh and Mike Staunton of London Business School. Bonds have returned an average of 3.6% annually in periods of falling rates, but only 0.3% when rates rise, the researchers calculate. The results include the effects of inflation.
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Good thing rates aren't rising then. Or are going to any time soon.
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Do these always assume you cash in your portfolio the day you retire?
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Yeah, BND is up 4.5% this year, which means rates have actually gone down in the recent past. They will go up eventually, but who knows when and how fast.
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It wasn't clear from the article how long "periods of rising rates" would be, or how periods with no rate changes fit their model.
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It's the general consensus, right or wrong, that the returns over the next few years are going to be a bit low. I don't know if it's entirely the fault of the interest rates though. Could it be that rates fall in times of economic distress and we follow a similar pattern of a quick recovery and then regain our slow march upwards? (Which brings rates back up as well)
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It wasn't clear from the article how long "periods of rising rates" would be, or how periods with no rate changes fit their model.
Jason Zweig is just a (well respected) financial journalist and author. I believe he is telling it like he sees it. He has no agenda other than education as far as I can make out.
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It wasn't clear from the article how long "periods of rising rates" would be, or how periods with no rate changes fit their model.
Jason Zweig is just a (well respected) financial journalist and author. I believe he is telling it like he sees it. He has no agenda other than education as far as I can make out.
That may be the case, but that still doesn't make it clear what MAAH was asking (how long "periods of rising rates" would be, or how periods with no rate changes fit their model).
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It wasn't clear from the article how long "periods of rising rates" would be, or how periods with no rate changes fit their model.
Jason Zweig is just a (well respected) financial journalist and author. I believe he is telling it like he sees it. He has no agenda other than education as far as I can make out.
That may be the case, but that still doesn't make it clear what MAAH was asking (how long "periods of rising rates" would be, or how periods with no rate changes fit their model).
I guess MAAH was referring to this:
"Since 1913, U.S. stocks have gained an annual average of 9.3% when interest rates fall, but only 2.3% in periods of rising rates, according to finance researchers Elroy Dimson of Cambridge Judge Business School and Paul Marsh and Mike Staunton of London Business School. Bonds have returned an average of 3.6% annually in periods of falling rates, but only 0.3% when rates rise, the researchers calculate. The results include the effects of inflation."
There is no mention of a model. They were looking at historical averages.