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.
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.
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.
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.