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A decade with no probable returns

All the following information is taken from Steve Blumenthal’s newsletter, “On My Radar: Balancing Offense and Defense, Equity Market Valuations and What They Tell Us About Coming Returns,” dated March 8, 2019.

According to Blumenthal, the goal of any investment portfolio is to capture growth while preserving capital, although these two may conflict with each other. Taking more risk can suggest better returns with the risk of losses in the event of a market downturn, while being more conservative in order to preserve capital could mean missing out on growth opportunities, no matter if in mutual funds, ETF (Exchange Traded Funds) or other investment tools.

Markets have periods of Bullish growth and Bearish decline. Depending on where we are in time, considering inflation, interest rates and other factors, experts give opinions on the development of the future trend of the stock market.

Mr. Blumenthal suggests a dozen graphs and charts highlighting the fact that according to experts consulted, the returns we should get from traditional markets over the next TEN YEARS should be minimal or even nil. In this document, we will focus on two of those charts, because a picture is worth a thousand words

The first chart shows: “The Household Equities Percentage vs Subsequent Rolling 10-Year of the S & P 500 Index Total Return” (SP500 is widely regarded as the best single gauge of large-cap U.S. equities).

This chart looks at equity ownership percentage. It has a high correlation (0.9, or 90%) to what future annualized returns turned out to be.

-The solid line represents the household exposure to equities, as a percentage, including mutual funds and pension funds. We are around 52.5%.

-The dotted line represents the average subsequent return that happened for the subsequent 10 years and is plotted on a rolling basis.

Here’s an example: In 2000, household exposure to equities was around 62% (scale on the left side of the chart). Referring to the right side of the graph, if it is true, the average return for the next 10 years could have been be expected to be about -3% per year on average. This prediction proved more or less accurate, the reality giving -2% on average between the years 2000 and 2010. So, today, we could foresee that the return on US equities for the next 10 years would be on average 3% per year before inflation, including dividends.

In summary, the more households are exposed to equity ownership, the lower will be the return of the next ten years.

The second chart deals with:Jeremy Grantham-GMO’S & Year Asset Class Real Return”.

Each month since the early 90’s, the Global Investment Financial firm – GMO publishes their forward return forecasts. This firm has a high correlation over time, 0.97 (1.0 being a perfect correlation).

For the next 7 years, GMO anticipates that US equity returns will average -3.7% and the US bonds expected return will be of -0.8%.

These forecasts issued by GMO are based on the reasonable beliefs of the firm and do not guarantee the future performance of the market

All those who have met me in the past 4 years know that I have integrated exempt market products into my service offering. I believe so much in this market because at the end of the day I can offer my clients an investment category that is not correlated with traditional markets, while suggesting quite respectable returns, considering the risk associated with this type of investment. What a nice tool to offer my clients to diversify their portfolio and reduce volatility. In addition, for the last year and a half, I have joined the firm Cape Cove Financial Management for the vision of the managers and for the opportunities that I could offer my clients so that they can enjoy the pleasant retirement they desire and deserve.

I am also, in addition to be a representative with an exempt market broker, a referral agent to our portfolio management department. Within the customer service offering, there are several investment opportunities that have no or little correlation with traditional markets (option portfolios, private real estate investment trusts, alternative or algorithmic products, tax efficient products, pre-IPO private equity shares). My objective is that, even if traditional markets do not provide the desired returns in the short term, I can offer you solutions that will help you achieve your goals.


Do not hesitate to contact me so that we discuss the present and your personal situation always in order to satisfy you fully

Luc Chartrand



WARNING. This announcement does not constitute an offer of securities on which you can rely to make your investment decision. The offer is qualified in its entirety by the offering memorandum of the issuer. Please read the Offering Memorandum before making any investment decision. The graphics and several comments are from Steve Blumenthal’s publication, On My Radar, March 8, 2019.