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Matt's Market Insights

 

Are we all fighting just to keep our heads above the rising tide of inflation?

 

It would seem so. I've commented on the absurdity of using past stock market returns to predict future performance in the long-run. For many years a "balanced" portfolio generated roughly an 8 percent annual return. This led many pension designers and retirement planners to make future projections based on this rate of return. But is it realistic? Probably not. Compound anything at 8% and after 20, 30, 40 years the results look fantastic. But the markets don't work that way. As much as Keynesians try to buffer the boom and bust cycles, to smooth out growth, it never works. We inevitably end up with booms and busts anyway, possibly larger than would have occurred in a non-managed economy. One large bust, or bear market, can wipe away decades of returns and leave you flat or down.

 

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