Joe Davis, Vanguard - The Idea Multiplier…We Believe It’s One Of The First Leading Indicators Of Commercial Innovation | #202
In episode 202, Meb talks with Vanguard’s global chief economist and the global head of Vanguard Investment Strategy Group, Joe Davis. Meb and Joe get into the broad framework of Vanguard’s research, and some depth on the thinking and process involved. They walk through some current thoughts on a few different asset classes and the Vanguard Capital Markets Model. The pair cover Vanguard’s most recent outlook, and their projections that offer an average return differential for non-US equities of roughly 3-4% vs. US equities.
Key Points
- The Vanguard Capital Markets Model predicts a subdued return environment for the next 5 to 10 years, with U.S. equities forecasted to yield nominal returns of around 4.5% and global equities slightly higher.
- Vanguard's research indicates that the historical average CAPE ratio is not a static benchmark and should be adjusted for current economic conditions like interest rates and inflation, which can lead to more accurate intermediate-term equity forecasts.
- The "Idea Multiplier," a new leading indicator of commercial innovation developed by Vanguard, suggests an acceleration in the spread of influential ideas globally, particularly in fields like genetics, energy, and materials, which could lead to an uptick in organic global growth in the coming years.
Resources: A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Malkiel) Vanguard economic and market outlook for 2020: The new age of uncertainty Improving U.S. stock return forecasts: A “fair value” CAPE approach The Idea Multiplier: An acceleration in innovation is coming The future of work America’s First Great Moderation (Davis, Weidheimer)
Chapters
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Transcript
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