Wilshire Consulting predicts 6.25% return on US Equities over a decade. Hussman and GMO predict negative returns.

Wilshire Consulting’s time horizon is 10 years, GMO’s is 7 years, and Hussman’s is 12 years.

The feature image is from GMO’s Third-Quarter Report as of 10/31/2017.

The report, which I highly recommend reading, states “*The chart represents local, real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward-looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance.”

Pension Funds’ Dilemma

The Wall Street Journal notes a pension dilemma and asks: What to Buy When Nothing Is Cheap?

The largest U.S. public pension fund debated in December whether to sell more than $50 billion in stocks as global markets raced higher. But in the end, the board of the California Public Employees’ Retirement System decided it was fine to hold more.

No matter which move Calpers made, it faced challenges. Scaling back Calpers’ equity investment would have reduced the fund’s projected 7% return at a time when the fund has just 68% of the assets needed to pay for future benefits. That would have meant higher contribution costs for local governments across California.

How much risk to take is a question facing all investors as they enter 2018. “Everything is overvalued,” said Wilshire Consulting President Andrew Junkin, who advises public pension funds. “There’s no magic option out there.”

Over the next decade Wilshire Consulting is predicting a 6.25% compound return for U.S. equities and 3.5% return for core bonds. International equities have a projected compounded return of 6.45%. Most pensions’ return targets remain at 7% to 8%.

Survival Tactics for a Hypervalued Market

Wilshire Consulting is a blazing optimist compared to GMO and Hussman.