The S&P 500 delivered a real return of more than 20% per year on average between 2023 and 2025, according to Allspring. The Federal Reserve is expected to raise its benchmark rate this week with a 90% probability according to the CME FedWatch Tool, as the consumer price index rose 3.4% over the twelve months ending in August. Bond yields now range from 5% to 6%, compared with 0.6% for one-year Treasuries and 1.7% for ten-year Treasuries a decade ago. Stocks may see more muted returns, with the S&P 500 trading at more than 20 times its projected earnings, a multiple that does not guarantee inflation-beating returns over ten years according to historical data. Experts recommend diversification, particularly toward small- and mid-cap U.S. stocks and international names, as well as Treasury Inflation-Protected Securities.
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