Investors are bracing themselves for more modest returns over the next five years, according to new research from Scottish Friendly.
The mutual’s latest Family Finance Tracker shows that 75% of investors expect total returns of less than 50% over the next five years.
By comparison, the UK’s largest 100 companies returned 50.5% and the US’s largest 500 companies 62.9% in total over the previous five years.
Scottish Friendly said a quarter (25%) of investors expect to generate total returns of 50% or more over the next five years, while 24% expect returns of between 20% and 49%. A further 16% expect gains of between 15-19%, 13% expect 10-14% and 16% forecast returns of less than 10% in total over the next five years.
Expectations vary significantly by age, with 38% of Gen Z investors expecting returns of 50% or more over the next five years, compared to 32% of millennials, 10% of Gen X and just 8% of Baby Boomers.
The data also reveals that older aged investors are most likely to expect lower returns, with 27% of Baby Boomers anticipating total returns of less than 10% in the next five years, compared with 21% of Gen X, 11% of Millennials and 16% of Gen Z.
Kevin Brown, savings expert at Scottish Friendly, said: “While markets have delivered strong returns over the past five years, our research reveals that investors are clearly expecting more modest gains over the coming five.
“This perhaps reflects a growing perception that the environment ahead may be more challenging, with elevated valuations, particularly in the US, and ongoing geopolitical uncertainty influencing investor sentiment.
“But, if the past few years have shown us anything, it’s that markets can defy expectations even when sentiment is cautious, valuations are high or conditions appear challenging.”
Brown said investing should be viewed through a long-term lens and investors should not react to short-term market noise.
“Over time, it is this discipline that can help investors build long-term wealth, with markets historically helping investors grow money ahead of inflation when held over the long term,” he added.
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