Managing expectations: Why 'reduced' equity returns are not abnormal

All good things come to an end. After experiencing ­annualised returns of more than 15% during the past five years, it is time for investors to adjust their expectations for equities downwards. Those who wish to stay stocked up on stocks must become accustomed to a level of return which is half that experienced in recent years. The new normal is, in fact, quite normal. A stabilising economy and less volatility in the markets are the reasons for this. Recent returns in equities have not been driven by underlying economic growth but by unconventional monetary policy, which is now on a p...