Choose Bonds, Not Stocks, for the Next 10 Years

Michael LebowitzAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The average 2024 Wall Street S&P 500 forecast is for a gain of 6.50% next year. In the past, a 6.50% expectation, while slightly lower than historical averages, was a no-brainer when choosing between stocks and sub-2.5% bonds. Today, that calculus has changed dramatically, with interest rates offering respectable yields.

Since stock-bond allocation decisions are now tricker than we are accustomed to, let’s walk through the differences in evaluating stocks and bond cash flows. That discussion, along with an important graph I will share, shows why we should “keep it simple stupid” or KISS with bonds.

Equity evaluation

I recently analyzed a stock that required me to obtain its five-year prior earnings growth. To source the data, I used three reliable and popular industry resources. I got three distinct answers. If it’s that challenging to get past data, consider the difficulty in forecasting future earnings and cash flows.