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The Art and Science of Forecasting Equity Returns

Wells Fargo Investment Institute - September 5, 2019

Key Insights

  • As we face more challenging times ahead, which of our “Four Pillar” factors have been the strongest predictors of equity returns, and which have been less effective? In this report, we share the indicators that we have found to be most reliable in our investment process.
  • While economic and trade-related risks are rising, our “Four Pillar” methodology results continue to signal that long-term investors should remain invested near their strategic asset allocation targets for most equity classes.
  • We prefer to use a combination of factors as we forecast future equity target prices and returns, but our favored factors change over time. We regularly review our models to assess which factors are working best to predict future performance.
  • The investment landscape is increasingly unpredictable. In order to remain nimble, we will regularly review our tactical guidance and forecasts and guide equity rebalancing, based on our Growth, Value, Quality, and Economic Pillar signals.

Download the report (PDF)