Soaring Markets Are Unlikely to Persist

Soaring Markets Are Unlikely to Persist

By James Parkyn - PWL Capital - Montreal

Investors have enjoyed several years of extraordinary returns. Canada’s total stock market has soared 23.5% annually over the past three years as of June 30th, 2026. The U.S. total market has gained 23.2%.

Can such lofty numbers continue? Twice a year, at PWL we make our best effort to look ahead to estimate future market returns for the next 30 years. We don’t do this to make predictions—no one can forecast the future.

Rather, these are expected returns that we estimate for use in our financial planning software when making long-term retirement projections for our clients. We arrive at the figures by combining 125 years of past data with estimates for the future based on current valuations and economic conditions.

PWL Senior Researcher Raymond Kerzérho joined us on our Capital Topics podcast to go over the latest figures.

The main finding of PWL’s research team: Recent exceptional equity gains are unlikely to continue. “We should be grateful for the great recent returns, but they’re unlikely to be repeated to the same extent in the future,” Raymond says.

“Strong recent returns do not necessarily imply equally strong future returns.”

Inflation and residence

Our projection for inflation is unchanged from last year at an average of 2.5% annually over the next 30 years.

We also make a projection for primary residences, which is unchanged too: a 1% expected annual gain after inflation (not including maintenance and property taxes).

Bonds

We make two estimates for bonds. These are nominal projections (before inflation) and before fees but including product management expense ratios.

• We expect annual short-term bond gains of 3.07% over the next 30 years. This is up from last year’s projection of 3.01% in expected gains.

• Projections for the Canadian bond universe, which includes long-term bonds, are up by about the same number of basis points from 3.53% to 3.58%.

Equity

Expectations for equity gains, on the other hand, have declined.

• In Canadian equities, we expect annual gains of 6.87% over the next three decades. This is down 14 basis points from last year’s projection of 7.01%.

• We project that U.S. equities will gain 6.44% annually, which is also down from our expectation of 6.48% made last year.

• The biggest change is in international equities. We expect gains of 7.04% annually in the next 30 years. This is down 24 basis points from 7.28% that we projected last year.

• A 60-40 stock-bond portfolio, on the other hand, remains virtually unchanged from last year. We expect a 5.73% annual gain, down from 5.76%.

Recent gains drove revisions

Equities saw downward revisions after their excellent performance over the past year. International equities, in particular, saw the biggest downward change.

This is because international stocks saw the most spectacular returns among equity asset classes. Emerging markets large and mid caps, for example, returned 49.9% in the 12 months ending June 2026. (See complete market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team.)

It’s also noteworthy that expected returns for Canadian and international equities remain higher than those for the U.S. This is because U.S. equities currently trade at a higher valuation. In other words, investors are paying more for each dollar of earnings generated by U.S. companies.

All else being equal, the more investors pay for a given level of earnings today, the lower the return they can expect in future.

How do our expectations stack up against those of other firms? Compared to BlackRock, Vanguard and AQR, “our estimates are more optimistic by at least half a percentage point,” Raymond says.

60-40 mix still a good option?

Some readers may question the value of having bonds in their portfolio given the low expectations for bond returns. After inflation and tax, returns may actually be negative.

Bonds have indeed been at the centre of debate about balanced portfolios, such as the classic recommended mix of 60% of assets in stocks and 40% in bonds.

There’s no single ideal mix that works for everyone, as investment manager Ben Carlson has pointed out. The ideal allocation depends on your time horizon, risk capacity and tolerance for volatility.

High-quality bonds can help cushion portfolio losses when inevitable corrections occur in equity markets. “That cushioning effect can give investors the confidence to stay invested through the difficult periods, rather than selling equities after a major decline,” Raymond says.

That said, it’s worthwhile to factor in expected returns when deciding on the right mix.

Actual returns exceeded expectations

How do actual market returns compare to expected returns in recent years? Data for our model portfolios as of June 30, 2026, shows compound returns have been significantly higher than expected returns. 

I’ll highlight the returns for our clients’ most common allocations. (These are pre-PWL fees but include the cost of the investment products.)

• A 60-40 portfolio saw a 10-year return of 8.45% annually and 7.12% over 20 years. If you had invested $100,000, it would have been worth $225,000 after a decade and $396,000 after two decades.

• A more aggressive 70-30 mix saw a 9.62% annual return over 10 years and 7.79% over 20 years. A $100,000 investment would have grown to $251,000 after 10 years and $448,000 after 20.

• An 80-20 mix saw a 10.78% return over 10 years and 8.46% over 20. An investment of $100,000 would have been worth $278,000 in 10 years and $507,000 after 20.

Stay the course

What are the takeaways from all these numbers? I think there are three.

1. Staying on course gives you the best long-term results. Despite the global financial crisis, pandemic and return of high inflation, stocks have generated returns well above long-term averages.

2. Investors should consider the estimated expected returns when deciding on their stock-bond allocation. The future may be different than the recent past. Recent past bond returns have been below expectations, while estimated future bond returns are just barely above inflation.

3. Reassess your risk capacity and tolerance in light of recent large gains. Be realistic about your true tolerance for downside volatility. This will help you set the right asset allocation for your investments.

Prudent investors know that strong past returns are no guarantee of returns in the future. Bear markets are a rare but unavoidable part of investing. They’re not a bug of the system; they’re part of the system.

Keeping this in mind and being prepared with a well-crafted investment plan will help you stay disciplined and in the market when things get tough. As we’ve seen over the last 20 years, this is the best way to ensure a successful investing experience.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

2026 Mid Year Market Check In

2026 Mid‑Year Market Check‑In

By James Parkyn - PWL Capital - Montreal

We’ve reached the halfway point of 2026, and as we usually do at this time every year, we’re taking a step back to look at what has shaped global markets over the past six months.

If I had to summarize the first half of 2026 in one word, it would be… eventful. Not chaotic like last year, but full of surprises that kept investors on their toes.

The big drivers have been geopolitical tensions, especially in the Middle East, and the tug‑of‑war between higher inflation and slowing growth. Add to that continued frenzy around artificial intelligence (AI) and the hype around the latest SpaceX initial public offering (IPO).

In short, investors had a lot to digest.

Markets shrugged off Iran war

Starting with geopolitics, the biggest shock of the first half of 2026 was the Iran war. The conflict triggered global stock market volatility and a sharp spike in oil prices. Crude oil shot up from around USD $70 to $125 a barrel driven by fears of supply disruptions.

The market reaction was fast and violent, with major stock market indexes losing roughly 10% in a matter of days. It’s important to remind ourselves that none of this was predictable. Investors who tried to trade around the headlines would have had a very hard time getting it right.

Even as the Strait of Hormuz remained closed to oil tankers for three and a half months, global stocks markets found themselves in positive territory at mid-year. In fact, the U.S. stock market rallied 15.5% in the second quarter, enjoying its best three months since spring 2020.

Go figure!

AI mania, return of big IPOs

Another big theme of 2026 was the AI boom. U.S. markets last year focused mostly on the so-called Magnificent 7 tech giant stocks. The excitement this year has spread to cloud infrastructure, networking equipment, data centers and advanced chip manufacturing.

We also saw the return of big, headline‑grabbing IPOs. After a long drought in the IPO market, 2026 is shaping up to be a big year. Elon Musk’s SpaceX came to market in June as the largest IPO in history. Open AI and Anthropic, both leading U.S. AI stocks, are also expected to go public in coming months.

For long‑term investors, it’s important to stay grounded and not get swept up in the hype. IPOs have historically been good for institutional investors that own shares before the stock went public. But for individual investors, their long‑run performance is far more mixed. They’re often unable to beat the return of a diversified benchmark like the S&P 500 Index.

Inflation is back

Turning to the economy, in Canada inflation has accelerated to its highest level in more than two years to reach 3.2% in May. This increase is due mainly due to the war in Iran and the resulting rise in the price of oil.

The Bank of Canada is currently dealing with mixed signals of a slowing economy marked by two successive quarters of GDP contraction and a possible need to fight inflation. For now, the central bank rate remains unchanged for the year at 2.25% and market expectations are that there won’t be any changes in rates in 2026.

Meanwhile in the U.S., inflation has risen to 4.2% in May, the highest level since April 2023 and well above the Federal Reserve’s target. Despite this news the Fed has kept the fed funds rate unchanged at the last meeting at 3.75%. The U.S. economy continues to defy expectations growing at 2.7% annually in Q1. Consumer spending is strong, and unemployment remains low at 4.2%.

Meanwhile, the European Central Bank raised interest rates by 25 basis points in June to 2.4% in order to keep a lid on inflation, which increased to 3.2% in the Euro zone in May. In the U.K., the Bank of England kept its benchmark rate unchanged at 3.75%.

Modest bond returns

Turning to market statistics, Canadian short‑term bonds, which are at the core of our fixed income portfolios, returned a modest 1.4% year‑to‑date, while the Canadian Universe Bond Index, which holds longer-dated bonds, delivered a slightly higher 2.1%.

On June 30, the yield on the benchmark 10-year Government of Canada bond was relatively unchanged since the beginning of the year at 3.37% versus 3.45% on December 31, 2025.

(As a reminder, a full array of market statistics is available on our team page on the PWL Capital website. Also find this data and the performance of our model portfolios on our Capital Topics website in the resources section.)

Canadian equities on fire

What about equities? In Canada, the S&P/TSX Composite Index was up 11.2% in the first half, driven mostly by energy and financial services which soared nearly 25% and 21% respectively. These two sectors have a huge impact on the TSX since they’re the two largest constituents—together representing over 50% of the index. For the last 12 months, the S&P/TSX Composite is up a massive 32.9%.

The surprise in Canada was that contrary to other markets, especially the U.S., the information technology sector has struggled and not kept pace with the AI story. The sector was negative 8.5% for the period.

U.S. and international stocks red hot

The U.S. market is also up nicely YTD reaching new all-time highs. The S&P 500 and the NASDAQ-100 Index shot up 15.5% and 21% respectively over the last quarter alone.

Interestingly, equities are up despite the Magnificent 7 tech companies having a difficult first half. These seven stocks represent roughly a third of the S&P 500. Yet, as a group, they’re down 3.4% YTD as of June 29.

Yet another surprise is that despite the AI story, U.S. value stocks have outperformed growth for the past six and 12 months.

Developed international equities, measured by the MSCI EAFE fund, had a strong first half too—up almost 10% in Canadian dollars. Meanwhile, emerging markets rose an impressive 28.4%; for the last year they are up 49.9%.

Ignore the noise, stick with the plan

The big lesson is that markets rarely follow the script investors expect. Between the war in Iran, oil price spike, rising inflation, AI boom, SpaceX mania and Mag 7 downturn, there were plenty of reasons to worry. Yet, staying the course with a broadly diversified portfolio and long-term plan delivered solid returns.

Review whether your portfolio still matches your time horizon, risk tolerance and capacity. You may also need to periodically rebalance your allocations to make sure you’re in line with your targets.

We can’t predict how eventful the second half of 2026 will be. But we can prepare by staying disciplined and grounded in evidence.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

FNB mania—more doesn’t mean better

FNB mania—more doesn’t mean better

By James Parkyn - PWL Capital - Montreal

Want to invest in companies that could benefit from alien contact? There’s now an FNB for that.

The Tuttle Capital UFO Disclosure FNB is one of a record number of new funds hitting the market as providers compete to carve out ever more specialized niches.

Over 360 new FNBs were launched in Canada last year, while in the U.S. the figure was over 1,150. The latter number is more U.S. exchange-traded funds than existed in total 20 years ago. The U.S. now has more FNBs than individual stocks being traded.

Active funds now dominate

It’s not just the unprecedented volume of FNBs that stands out. It’s also their holdings and strategies.

FNBs were until recently synonymous with low-cost passive index investing. You bought them if you wanted broad market exposure, low fees, tax efficiency and transparency.

That has changed. Nearly two-thirds of new FNBs in both countries last year were actively managed. There are now more actively managed FNBs than passively managed ones.

And this doesn’t even include a large category of FNBs that technically fall into the passive bucket, but are mostly used by active traders. These include leveraged, inverse, crypto-asset and other sector FNBs.

“I don’t need aliens to be real”

Some of the new FNBs tap into fads or esoteric ideas in order to stand out and attract investors. This includes the UFO Disclosure FNB (ticker UFOD), which invests in companies “positioned to benefit from government disclosure, confirmation or exploitation” of UFO “advanced technologies.”

“I don’t need aliens to be real for my thesis to work, but it’s a lot more fun if they are,” portfolio manager Matthew Tuttle was quoted saying by The Wall Street Journal. The fund charges a 0.99% annual fee and has $2 million in assets.

Another odd duck is the Nicholas Bitcoin and Treasuries AfterDark FNB. This one is based on the notion that bitcoin outperforms outside U.S. market hours. It holds bitcoin when the market is closed, then flips into U.S. Treasury bills or cash when the market opens.

It charges 0.97% annually.

Average MER tops 0.65%

Such eye-popping fees, once the reserve of mutual funds, are now becoming more of the norm among FNBs. Driven higher by active funds, the average Canadian FNB’s management expense ratio is now over 0.65%.

This is many times above that of traditional indexed FNBs, which generally charge less than 10 basis points for Canadian and U.S. equities.

The danger is that investors see “FNB” and assume a fund has low fees.

Stocking picking and timing doesn’t work

Also concerning is that the flood of new FNBs makes it harder for long-term investors and advisors to choose appropriate investment tools. At PWL, we’ve been investing in FNBs for over 20 years as low-cost passive vehicles to get broadly diversified market exposure. We became known as “the FNB guys” because of our early adoption.

We base our strategy on solid evidence showing that investors have subpar results when they try to pick stocks or time the markets. As Warren Buffett has said, “The only value of stock forecasters is to make fortune tellers look good.”

No one knows which companies or countries will outperform. In fact, just 4% of stocks accounted for all stock market wealth creation above a risk-free investment in Treasury bills from 1926 to 2023, one study found.

How do we ensure we own those 4%? Owning the entire market—and diversifying internationally—enables us to gain no matter what.

FNB slop

The tsunami of new FNBs can mislead investors who don’t fully understand the risks of niche, complex, high-fee products. Our colleague Ben Felix calls them “FNB slop.” Many seem to be designed with marketing in mind to gather assets—not with investors’ long-term benefit at the forefront.

Because many of the funds are so fringe, they often gather only a few million dollars and eventually shut down. A record 146 active FNBs closed or merged in the U.S. in 2025, a Morningstar report said.

“Most of the FNBs had small asset bases. Funds cost money to operate, and those that don’t garner enough assets are susceptible to being liquidated or merged away,” Morningstar said.

1 in 5 US active funds beat peers over 10 years

Ironically, as the FNB universe gets noisier, the evidence for broad-based, low‑cost indexing keeps getting stronger. Two new reports drive this message home.

Morningstar’s US Active/Passive Barometer Report found that only 38% of U.S. active funds survived and outperformed their average passive peers in 2025. U.S. managers had a 37% success rate, while international managers did a little better, with 48% outperforming.

Among bond managers, 40% beat passive peers, while just 4% of corporate bond managers managed to.

97% of Canadian active funds lagged

Longer term, active managers fared far worse, with only 21% of U.S. active funds surviving and outperforming their passive counterparts over 10 years. That drops to just 8.1% for U.S. large-cap equity funds. Over 20 years, the rate is even worse—a mere 6.4% among active U.S. large caps. Higher fees were a big factor in the active funds’ poor results.

In Canada, 85.4% of active funds underperformed their benchmarks in 2025, according to the SPIVA Canada Scorecard. Over 10 years, the results were even worse—with 97% of active funds being bested by their benchmark.

4 FNB mania takeaways

What to make of the FNB mania? Here are our four takeaways.

1. Don’t confuse innovation with improvement.

2. Simplicity wins.

3. Stick to the evidence.

4. Filter the noise.

The markets are like a giant supermarket with many aisles full of junk food. To eat healthy, you need to choose wisely.

While the FNB universe gets more chaotic, the core principles of sound investing remain unchanged: Low fees, broad diversification and long‑term discipline pay off.

Find commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

2025 Year in Review—A Masterclass in Misleading Emotions

2025 Year in Review—A Masterclass in Misleading Emotions

By James Parkyn - PWL Capital - Montreal

On behalf of the PWL team, I’d like to wish you a happy, healthy, and prosperous year in 2026.

Our first blog of the year is a good time to look back on what happened in the markets and economy in 2025. Last year was a masterclass in how emotions can mislead investors. It defied expectations at almost every turn.

Pundits kicked off 2025 with sombre warnings of stretched valuations, slowing growth and the possible collapse of the AI boom.

If I had told you at the start of 2025 that we’d see sweeping tariffs, a record‑long U.S. government shutdown, sticky inflation and a geopolitical rollercoaster, I think you too would have expected a rough year for stocks.

Third year of double-digit gains

Every month seemed to bring a new reason to worry. Last April saw one of the sharpest selloffs in years after the U.S. announced sweeping tariffs.

Yet, in the end, markets delivered a third straight year of stellar double‑digit gains for U.S. and Canadian stocks, as we discuss in our latest Capital Topics podcast.

Very few pundits saw such results coming—proof, once again, of our frequent advice to ignore market forecasts. (See, for example, our last blog titled “Our Best Advice of 2025.” The first tip was “Ignore the pundits.”)

The incredible results also add to the ample evidence for patiently sticking to your long-term investing plan. Trying to time the market by selling would have been a costly mistake.

Canada was the biggest surprise

Perhaps the biggest surprise was Canada. Despite the glum headlines and anxiety over U.S. tariffs, the S&P/TSX Composite Index quietly delivered one of the strongest performances in the world.

(You can find market statistics on our Capital Topics website in the resources section or on our team’s page on the PWL Capital website.)

Economically speaking, 2025 wasn’t a boom or bust. Inflation in Canada continued its downward drift, ending the year at 2.2%. This allowed the Bank of Canada to start cutting rates earlier and more aggressively than the U.S., with four rate cuts during the year from 3.25% to 2.25%.

Canadian bonds did their job

Stubborn inflation in the U.S. led the Federal Reserve Board to be more cautious, with only three rate cuts from 4.5% to 3.75%. Euro area inflation fell more sharply, leading to four cuts from 3.15% to 2.15%.

Unemployment edged higher in both Canada (ending at 6.8%) and the U.S. (finishing at 4.4%). U.S. GDP growth surprised with a final-quarter annualized rate of 4.3% versus Canada’s more modest 2.6% third-quarter increase.

Thanks to the Bank of Canada’s rate cuts and falling yields, the Canadian short‑term bond index finished the year up 3.9%. The broader universe bond index, which holds longer-dated bonds, returned 2.6%.

Bonds didn’t steal the spotlight, but they did their job of providing stability and income.

31.7% gain for S&P/TSX

The spotlight stealer was, without a doubt, the stock market. Equities powered through wild swings in investor sentiment and uncertainty to deliver another banner year.

It’s worth recalling that in late 2024, many investors wanted to go all‑in on the U.S. market. U.S. markets had dominated for a decade, handily outperforming Canadian equities by more than 6% annually for the last 10 years. Future prospects were gloomy because of the prospect of tariffs, job losses and a productivity crisis.

But Canada shocked everyone. As of December 31, the S&P/TSX Composite Index was up 31.7%—almost triple the return of the U.S. total market index in Canadian dollar terms. Small caps did even better—skyrocketing a whopping 50.3%—while large and mid-cap value stocks gained 35.8%.

Safe-haven investors powered Canadian gains

The gains reduced the gap between U.S. and Canadian equities from 6% annually to 1.5% over the last 10 years. This is especially impressive considering that U.S. returns included the booming Magnificent 7 stocks.

This reinforces our message of diversification and not trying to wait for “the right moment” to invest. Returns often come in short, unpredictable bursts. If you wait, you’re likely to miss out.

The Canadian gains were powered by financials, energy and basic materials—the last benefitting from the rush into gold by safe-haven seekers. Basic materials small caps spiked an incredible 137.6% in 2025.

Mag 7 mega-stocks soared 21.9%

U.S. equities lagged, but still turned in a decent performance, with an 11.9% gain for the U.S. total market index in Canadian dollars (17.2% in U.S. dollars, the difference being due to the greenback falling against the loonie). Unlike in Canada, small caps and value stocks trailed, up 7.7% and 10.7% respectively in Canadian dollars.

The AI boom didn’t end; if anything, it accelerated. Roughly 40% out of the 17.9% return of the S&P 500 Index came from tech stocks, while 18% was from communication services.

The Magnificent 7 tech mega-stocks, which represent about a third of the S&P 500, remained the gravitational centre of the market with an average performance of 21.9%. That said, the boost really came from only two of the Mag 7 stocks that beat the market— Alphabet (Google), which rose 65.2% in U.S. dollars, and NVIDIA (up 38.9%).

International stocks delivered another surprise. International large and mid-cap stocks shot up 25.3% in Canadian dollars, while small caps and value stocks surged 25.9% and 35.8% respectively.

Emerging large and mid-cap stocks rallied 28.3% in Canadian dollars.

Uncertainty is the cost of admission

Uncertainty was plentiful in 2025, but 2026 has started off no different. Geopolitical and tariff risks are still significant. In fact, there has never been a year when everything was calm and predictable. Markets have always lived with uncertainty. Sudden events push us to react emotionally, as we discussed in our recent blog on investors’ behavioural biases.

But uncertainty isn’t a bug; it’s the system—the price of admission for higher long-term returns.

Last year was a reminder that markets don’t move in straight lines or follow the headlines. Remaining invested, diversified and disciplined paid off again. Investors who tried to time the market missed the strongest parts of the rally.

Investors who stayed the course prospered.

Find more commentary on personal finance and investing, our podcast, past blog posts, eBooks, model portfolios and market statistics on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.

High Returns Unlikely to Last

High Returns Unlikely to Last

By James Parkyn - PWL Capital - Montreal

Investors have had an incredible ride in the past decade. Stock markets soared, portfolios swelled.

It’s tempting to get complacent and expect this to be the new normal. Some investors may come to expect double-digit stock gains year after year. They may even reduce their savings or build lofty expectations of an early retirement.

Tap the breaks—the coming years are likely to be less generous.

4.5% real return on equity

Twice a year, PWL Capital updates our long-term view for how stocks and bonds are expected to perform over the coming 30 years. Our latest update found that investors can expect a 4.5% annual return for global stocks after inflation, and 1% for bonds.

The figure for stocks is far lower than the 8-12% real returns that many investors and advisors expect, according to a recent Natixis survey.

Such rosy investor expectations aren’t realistic, says PWL Senior Researcher Raymond Kerzérho. He co-authored the PWL update and discussed the findings on our latest Capital Topics podcast.

7% return for Canadian stocks before inflation

Raymond cautions that his figures aren’t a prediction, but rather a planning assumption. We use these numbers to help prepare long-term financial plans and retirement projections for our clients. The figures are also subject to a substantial margin of error. No one can predict the future!

That said, Raymond’s nominal return estimates are:

• Bonds: 3.5%

• Canadian stocks: 7%

• U.S. stocks: 6.5%

• International stocks: 7.3%

• Global portfolio of Canadian, U.S. and international stocks: 7%

Raymond also expects long-term inflation of 2.5%. In other words, real returns for equities are likely to be far below what investors and advisors expect.

“Dangerous delusion”

Equities are likely to face headwinds because valuations are historically high. The S&P 500 has returned 15% annually over the past decade, “far in excess of its long-term annualized return of 10.3%,” Wall Street Journal columnist Jason Zweig recently noted.

Taking high returns for granted can leave you with “a severe shortfall” if markets stumble, Zweig said.

The problem, he said, “is that a booming stock market breeds complacency. Huge returns make a comfy retirement for everyone seem within reach, without effort or sacrifice. And that’s a dangerous delusion.”

Homes aren’t a magic exception

Real estate isn’t immune from overly lofty expectations. Most people have a lot of money tied up in their principal residence. But in another eye-opener, Raymond expects a long-term annual price appreciation of just 1% for houses after inflation. This doesn’t even include home ownership costs such as taxes, insurance and maintenance.

The 1% figure may come as a surprise to Canadians used to skyrocketing house prices. As Raymond points out, the recent outperformance has been the exception, not the rule.

“When compared to stocks over the long term, housing does not compare well,” he told our podcast. “If you account for inflation and all the money you reinvested in it, the return on a personal residence is not great.”

Peers are more pessimistic

PWL isn’t the only one warning of lower future returns. In fact, our expectations are more optimistic than those of other major investment firms.

As Raymond noted last year, our long-term expectations for Canadian bonds and most equity markets are higher than those of four other firms we studied.

“Listeners may think we’re too conservative with our expected return assumptions, but in reality, we’re a bit more optimistic than some major investment firms,” Raymond said.

Investors expect 10.7% real returns

The sobering warnings stand in sharp contrast to investor expectations. Buoyed by years of high-flying stock gains, investors expect 10.7% annual after-inflation returns over the long term in stocks globally, according to the 2025 Natixis Global Survey of Individual Investors.

Expectations are even higher for U.S. stocks—12.6% annually. Even advisors expect 8.3% after inflation, the survey found.

“I was shocked when I read that,” Raymond said of the survey results. “That’s nonsense…. A 10.7% real return is not going to happen. Maybe for short periods it can happen, but in the long run, no way….

“It is your advisor’s job to educate you about the expected return of your portfolio. If your advisor has not set reasonable expectations with you, I think you should consider a change.”

Don’t steer by the rear-view mirror

The final verdict: The past doesn’t predict the future. You don’t drive a car by looking in the rear-view mirror. You shouldn’t make investing decisions that way either.

Be disciplined about sticking to your long-term investing plan. You or your advisor should periodically rebalance your holdings to align with your target allocations. Enjoy the gains of the past, by all means. But don’t build your future on them continuing.

Model portfolios and market statistics can be found on the website of PWL Capital’s Parkyn-Doyon La Rochelle team and our Capital Topics website. Also find more commentary and insights on personal finance and investing in our podcast, past blog posts and eBooks.

Let us help you secure your legacy and make a lasting difference. Contact us today to learn more about our comprehensive wealth transfer and philanthropic planning services.

Stay informed and inspired. Subscribe to our Bi-Weekly Newsletter for the latest podcasts, blogs, and James & François’ top reads from the past two weeks.