Is the Euro crisis over? What if China slows down? Do liquidity premium exist?
“The future is like a corridor into which we can see only by the light coming from behind.” This quote sums up the hazardous nature of the exercise to try and tell what the future will bring, certainly with respect to the world economy and asset returns. As stated by Robeco in a recently published report on this matter, all we have to go by is what we have seen in the past. So, the outlook 2015-2019 presented by Robeco in this video is as much a story about the past, as it is for the future: Robeco assumes that the long-term returns that we have seen in the past will – under normal circumstances – be a good guideline for the future. Interestingly, the further we try to look into the future, decades out, the more we tend to assume that the returns we have seen over the past hundred years will be more or less repeated. The shorter the outlook –and with short in this context Robeco refers to the five-year outlook being presented here– the more emphasis will be put on recent history.
A fair question is why it should be expected to see similar long-term, steady-state returns, even though the past hundred years can in no way be compared to the hundred to come. The simple answer, according to Robeco, is that the past hundred years have seen enough turmoil and volatility to be considered a good sample of possible hurdles that we will face in the next hundred years: wars, (hyper) inflation, natural disasters, booms, busts and financial crises – the world has had our share of turbulence. Yet underlying all this is Robeco’s conviction, which stems from their belief in the ingenuity of human beings, that we will realize equivalent returns. Robeco believes that mankind will continue to overcome complex and threatening situations. They trust that the drive of innovation and productivity gains will persist. Certainly, there will be setbacks as there have been in the past, but generally Robeco believes that growth, and with it returns on financial assets, will continue more or less as before.
You may access an Executive Summary of this report through the pdf file attached, and you may download the full report through this link.