RE: "With a market reverting to the historical mean, which modus/i
occupandi would large segments of the investorate choose?"
Two observations.
First Observation: The answer to the above question may depend on the definition of "reverting to the historical mean." To illustrate, let's consider the hypothetical case of "reverting to the historical mean" over the next five years.
Over the last 70 years, the average return was slightly more than 10%. Therefore, one possible interpretation of "reverting to the historical mean" for the next five years is averaging approximately 10% per year for that time period.
However, there is another possible interpretation of "reverting to the historical mean." Perhaps, the market return over the next five years, when combined with the return of the past five years, will result in an average annual return of 10% for the 10-year period. In this hypothetical scenario, the total return over the next five years (1998 through 2003) would need to be negative in order for the period from 1993 through 2003 to average 10% per year.
My guess is that if the first of the above scenarios plays out, and the average return over the next five years is 10%, the "investorate" will continue an investment style similar to the recent past. On the other hand, if the second scenario plays out, and we experience a period similar to 1966 - 1982, the "investorate" will simply avoid equity investments in all forms.
Second Observation:
It is probable (not certain) that the health care and technology sectors will outperform the overall market if market returns slow or go negative.
Best wishes,
I2 |
