The problem with using analogs is you are basing the comparison on a period when the megapower rose to dominance, something not likely to repeat unless the rest of the world blows itself up again.
On demographics it is not as terrible as some say but the balance is still tilted toward more money coming out of retirement plans than going in, building to a pretty severe imbalance when the largest cohort (1957) begins retiring en masse.
From Bloomberg:
There’s a common question in job interviews that is incredibly tricky to answer, even though you know it’s coming. Where do you see yourself in 10 years?
The response says so much about the candidates’ level of ambition, confidence, and drive -- or maybe just their ability to conjure up farm-fresh baloney on the spot.
For investors interviewing today’s U.S. stock market to see how much longer it plans to stay on the job, BMO Capital Markets strategist Brian Belski has an attention-grabbing answer: The bull looks like it has legs to run another 10 years with 10.5 percent average annual returns from current levels.
Before discussing his rationale, consider how hard it is to precisely predict where the market will be a year from now, let alone a decade. At the beginning of 2013, Belski’s prediction for year-end level of the Standard & Poor’s 500 Index (SPX) stood at 1,575. The benchmark gauge ended the year at 1,848.36, more than 17 percent higher than his forecast. Even the strategists closest to the mark, Tobias Levkovich at Citigroup Inc. and Savita Subramanian at Bank of America Corp., were more than 10 percent off.
Regardless of whether you have faith in Belski’s 10-year prediction or not, his report makes it clear it’s a well-reasoned call and he’s not conjuring up farm-fresh baloney on the spot. Here is the condensed version of his thinking and math:
Lost Decade
•“Lost decades,” like what followed the peak of the dot-com bubble in 2000, usually precede extended bull markets. His 10-year, 10.5 percent annual return estimate is based on what followed lost decades ending in 1982 and 1947. “Stocks typically enter a very long period of expansion after emerging from a period of negative 10-year returns.”
•Pent-up demand will cause an “impressive” increase in capital spending. Corporations were reluctant to spend on anything but buybacks and dividends over the last few years. “Sooner or later, companies will need to invest in their businesses to provide themselves and investors with future growth opportunities."...MORE
