Feb 2001
Over the next 10 years I think S&P 500 earnings will grow about 7-8% per year on average. To this number, I’d add about 2% per year for dividends and then subtract about 5% per year for p/e ratio contraction (back to more typical levels). In sum, I think the S&P 500 will average a return of only 4-5% annually over the next 10 years. Index investors need to deal with this outlook which, I submit, is realistic, not pessimistic.