Above-Average Returns: Why The Next Decade Differs Authored by Lance Roberts via Real Investment Advice , Sixteen years of above-average returns came mostly from rising valuations , and that is the one source that cannot be repeated from here. Key Takeaways Since the end of 2009, the S&P 500 compounded at 14.34% a year, or 11.41% after inflation.
The long-run real average since 1881 is 6.72%. Of that 11.41%, some 4.33 points a year came from nothing but the valuation multiple doubling. Across 146 years, 140 of the 164 starting months with a CAPE of 25 or higher produced a below-average next decade .
The 24 exceptions all fall in 2014 to 2016. The highest CAPE ever to precede a decade this good was 26.95, in August 2016. Today's reading is 41.04. In 2016, McKinsey warned that the "golden era" for investors had ended. Falling rates, fatter margins, and a rising multiple had done their work in creating above-average returns.