[rr888]

I agree, I think my problem is that the last few decades the returns on stocks and property has vastly exceeded economic which means that a) people have unrealistic expectations going forward and b) prices are bid up so high its likely future returns will be flat or negative for decades.

[zhdc1]

> I think my problem is that the last few decades the returns on stocks and property has vastly exceeded economic

I agree that speculative returns are higher now than they have been in some/many historical periods. It's very likely that this will depress returns in the future, but to what extent is anyone's guess.

However, it's hard to construct a thesis that has US equity returns at or below 0 over a long period fo time. For that to happen, some combination of the following would also have to occur:

1. Population decline leading to a corresponding decline in economic activity. US demographics are projected to be better than most other developed countries for the next several decades. The US is also a destination for highly educated immigrants. Finally, large US companies are international and can (and will) take advantage of growing markets in South Asia and Africa.

2. Severe economic decline brought about by war, civil unrest, or an existential crisis. This is extremely hard to imagine. Short of a conflict with China or another pandemic, there is little reason to believe that economic activity in the US collapse in the immediate future.

3. Speculation was so high that a resulting return to the mean significantly reduces long term equity prospects. I agree that there is a certain amount of speculation in the market (although the mechanisms are different from what happened in the early-00s). However, valuations are no longer significantly high by historical standards. High, yes, but not to the point where mean reversion would suggest a multi-decade depression in equity returns.

[hnfong]

> it's hard to construct a thesis that has US equity returns at or below 0 over a long period fo time

> there is little reason to believe that economic activity in the US collapse in the immediate future

> not to the point where mean reversion would suggest a multi-decade depression in equity returns

I don't see how you're ruling out a scenario where the US economy can't keep up with expected growth and stagnates for a couple decades. You rightly claim that it's unlikely in the "immediate future", but 20 years from now? A pandemic already happened, why would it be "extremely hard to imagine" another more serious one happening soon?

To repeat the GP's comment: As a non-American I can't believe how much faith people put in the stock market here. I think they're going to be a rude shock the next few decades.