As this NYT article discusses, forecasting markets and market-shaping events (e.g., future inflation) is not a full-proof exercise in certainty. Put another way, sometimes the forecasts, even the consensus forecasts, are wrong. The article pointed to some interesting historical returns that might confirm or belie your thoughts on the matter:
A 100 percent stock portfolio had a 10.3 percent average annual return. It produced losses in 25 of those 95 years, and the worst year was 1931, with a 43.1 percent loss.
The old standby, a 60-40 portfolio, had a 9.1 percent average annual return. Twenty-two years produced losses, and the worst year, also 1931, had a 26.6 percent loss. Note that bonds staved off the deeper losses of the pure stock investment.
A 100 percent bond portfolio had a 6.1 percent average annual return. Nineteen years produced losses, and the worst year was 1969, with an 8.1 percent loss. Inflation in 1969 soared to 5 percent, yet the loss for bonds was inconsequential compared with those in bad years for stocks.
[EOP]
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