After a Decade of Strong Returns, What Comes Next?

After a Decade of Strong Returns, What Comes Next?

Sometimes, it pays to think in decades rather than months and quarters. At the same time, it is nearly impossible to predict what the next decade may bring in terms of technology, wars, geopolitical events, and economic growth.

Context

Consider the last ten years. Donald Trump was elected president, artificial intelligence became mainstream, and the financial markets delivered strong returns. In the first half of the decade, interest rates were near zero and capital was cheap. Then COVID disrupted the global economy and indirectly contributed to a surge in inflation, which led to a higher interest rate environment.

Across the board, investors, particularly those in large-cap U.S. stocks, have performed exceptionally well. The S&P 500 has gained over 300% over the last decade. 

Broadly diversified equity investors have also done well. U.S. small-cap stocks have returned approximately 163%, while mid-cap stocks are up around 151%. Gold has risen 248% and Silver approximately 374%. Sector-wise, technology has been the top performer within the S&P Index, gaining nearly 600%. Meanwhile, Energy was the worst performing sector, returning just 76%. 

Looking internationally, European stocks returned approximately 154% and emerging markets around 147%. 

Overall, despite periods of volatility, financial markets have experienced a significant bull run. Large-cap growth stocks have dominated, while other areas lagged. The question becomes; what will the next decade bring – a continuation of this trend, or a “lost decade” such as the S&P 500 experienced in the early 2000s?

Current Valuations

While I believe that making specific market predictions is often unproductive, we can evaluate current market conditions. 

The S&P 500 is trading at extended valuations. The forward price-to-earnings (P/E) ratio is currently 20.9, compared to a 30-year average of 17.2. Roughly one standard deviation above the average.

In other words, there is pressure for substantial earnings growth to justify current valuations in large-cap, U.S. stocks.

Meanwhile, international valuations appear much more reasonable. The MSCI Europe Index is trading at a forward P/E of approximately 14.4 and the MSCI Emerging Markets Index close to 11.5. 

An argument can be made for increased exposure to international equities based on valuations alone. However, valuations aren’t everything, stronger companies in preferable economic environments deserve higher valuations. 

What about small-cap stocks? The MSCI World Small Cap Index has a forward P/E of roughly 16. Challenges in this segment include tighter credit conditions and the trend of companies staying private longer, sometimes bypassing traditional small-cap benchmarks altogether.

Comparing U.S. growth versus value, the MSCI USA Value Index has a forward P/E of 16.6, while the MSCI USA Growth Index is at 25.7. Value appears much more reasonable than growth.

So, what can be taken from this data for portfolio positioning over the next decade?

Portfolio Implications

It is impossible to know with certainty how the next ten years will unfold. We certainly couldn't have predicted how the last ten years have played out.

Artificial intelligence may continue to accelerate, driving productivity gains and supporting earnings growth in U.S. equities. Alternatively, rising government debt could contribute to persistent inflationary pressures and higher interest rates. A global war could break out...

What we can assess is the relative starting point across asset classes. Although not necessarily an indicator of short-term performance, various asset classes appear much more reasonable than others.

The takeaway is that a well-diversified portfolio will be positioned well for the decade ahead. While large-cap U.S. growth stocks have performed well, it makes sense to diversify outside of this. This can include adding international, value, and targeted small-cap exposure to the portfolio. Doing so may help reduce concentration risk and improve the probability of more consistent returns over time.

As always, please consult with your financial advisor regarding your specific investment strategy.

- Bill Rautiola, RICP ®, AIF ®, PPC ®

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. All investing involves risk including loss of principal. No strategy assures success or protects against loss. There is no guarantee that a diversified portfolio will enhance overall returns or outperform a non-diversified portfolio. Diversification does not protect against market risk. Stock investing includes risks, including fluctuating prices and loss of principal.​ International investing involves special risks such as currency fluctuation and political instability and may not be suitable for all investors. These risks are often heightened for investments in emerging markets. The economic forecasts set forth in this material may not develop as predicted and there can be no guarantee that strategies promoted will be successful.

Sources. 

Return Data - Y-Charts.com, Accessed 4/20/26, (S&P 500 Index Total Return 4/19/2016 

through 4/19/2026.), (MSCI USA Small Cap Total Return 4/19/2016 through 

4/19/2026.), (MSCI USA Mid Cap Total Return 4/19/2016 through 4/19/2026.), (S&P 

GSCI Gold Total Return 4/19/2016 through 4/19/2026), (S&P GSCI Silver Total 

Return 4/19/2016 through 4/19/2026), (MSCI Europe Total Return 4/19/2016 through 

4/19/2026), (MSCI Emerging Markets Total Return 4/19/2016 through 4/19/2026), 

(S&P Technology Select Sector Index 4/19/2016 through 4/19/2026), (S&P Energy 

Select Sector Index 4/19/2016 through 4/19/2026)

S&P 500 FWD P/E - JPMorgan Daily Guide To The Markets, Accessed 4/17/26, 

https://am.jpmorgan.com/us/en/asset-

management/protected/adv/insights/market-insights/guide-to-the-markets/

Index Valuations - Accessed 4/20/2026, https://www.msci.com/indexes