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Can the Dow Hit 20K?

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    Seth Masters, Alliance Bernstein’s CIO, on his market predictions for the next decade.

  • Duration 3:21
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Could actually hit 20000 in the next ten years -- -- chief investment officer with Bernstein global wealth management joins us now.

OK real live I love this let's take the market sentiment rag tag clouds to pay for but let's talk about how you get there.

One year assumptions is that stocks are going to return 8% annually over the next ten years' -- get that.

-- if stocks do return its annual you actually get to -- thousand about five years so.

And it only takes -- 5% growth to get -- 1000 independent way to get your 8% number.

Well it percent -- I think a pretty reasonable central expectation if you think that there's going to be roughly.

3% inflation 1% population growth 2%.

-- productivity growth which is a long term trend and about 2% dividend yield.

You have those numbers up you got about 8% which is we think -- reasonable expectation could be a little bit less and then it just takes a little bit longer to get about where you're also assuming.

Earnings increased 6% per year as you mentioned dividend yields remain at least 2% -- and you PE ratios rich.

-- to their long term averages it seems to me like that's.

That could actually happened based on the help of corporate America right now.

-- -- the other actors you know the old little Middle East going on and even think things at -- that could happen.

I think people are very worried about short term fluctuations which is why they're willing to buy treasury bonds are currently yield one point 8%.

Which is what you know your returns are going to be if you hold them for ten years.

The problem is that's not enough for most people to reach their financial Jack -- and in the long run.

The long run growth of -- the economy out of stock.

-- indices has been about 7% per annum our guess is that at 6% as you mentioned.

It could be a little bit slower than not going forward.

But there's no reason to believe that it won't be the fact is American companies are incredibly profitable they're doing extraordinarily well in a tough economic environment.

And we think that even if they grow even a bit slower than they have been.

We still -- gonna get -- -- for.

So let's talk about the slower growth because it.

What we've been seeing a lot of those cost cutting so we've seen good bottom line numbers coming out as a result we've yet to see that top line growth that we really need to get this this market -- -- to the races.

And that's -- -- on the consumer consumers still struggling so how does the consumer fit into this.

Why I think that obviously the economy has been growing slowly and that's.

And in large part because consumers aren't spending huge amounts and companies are being very prudent -- not.

In fact investing a lot or -- and why -- -- why unemployment has been stubbornly high.

I think the important thing -- is to think as an investor over.

-- next five or ten years where things likely to head and the outlook is a lot -- Colombian people currently.

Feel it's good news so does that mean -- a clearly that you're telling when they should be fully invested in the equity market actually not not fully know because.

Volatility is also a real phenomenon and most people only have a certain amount of response that they can bear.

And frankly most people's objectives don't require a 100% investments in stocks right so that to the -- we recommend that people should understand what their objectives are.

And how much risk they need to take to meet those objectives of typical client with typically have an even balance between stocks and bonds and the point is yes.

They should be there instead of bailing on stocks because that's -- everybody seems to -- these days that's right headlines well I hope you're.

And I cover that net back FC contribute -- right set masters thank you so much --

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