Over the last 100 years, the US equity market has returned about 9% annually. What will it return over the next 100 years? Well, the index fund promoters say that history will repeat itself and that the next 100 years will look like the last 100 years, so you should go to Vanguard.com and put all your money in the Vanguard Total Stock Market Index Fund (VTI). I don’t believe this to be true, claims Jared Dillian, editor of The 10th Man.

Stocks are loosely correlated to corporate earnings, which are loosely correlated to economic growth. Economic growth has been gradually slowing over the last 100 years. I predict it will slow further.

Output is a function of hours worked, effort, and productivity. In the future, people will work fewer hours and won’t work as hard. I have a nose for social and cultural trends, and I know how hard people worked in 1999, and I know how hard people work today. There is no comparison.

Part of this is because of the pandemic, which served as some kind of psychological shock—people decided that they now value leisure more than output. There are places in the world where people traditionally value leisure more than output, like Europe, where stocks have returned zero over the last 15 years. The good news is that productivity continues apace—ChatGPT is a good example of that, a productivity miracle.

I don’t want to call this laziness because that’s not what this is—it’s a shifting of priorities. Twenty-five years ago, it was pretty common to see people working two jobs. Now, it is a rarity.

Our hustle, our work ethic, has disappeared, and there are economic consequences to this, which nobody is talking about. There is no such thing as a free lunch. If you want money, if you want prosperity, you have to work long hours, you have to work hard, and you have to work productively. Don’t get me started on the “quiet quitting” and “lazy girl” trends.

For a while, trend GDP growth was about 4%. Then it dropped to 3%. We’ll be lucky to achieve 2% in the future—I think it will be closer to zero or 1%. And if we have GDP growth of 1%, it is unlikely that stock market returns will be anywhere near 9%. And if stock market returns are going to be nowhere near 9%, then it doesn’t make much sense to put your money in VTI.

Alternatively, we might get our 9% return, but after a decade or more of negligible returns. We have had such periods in the past, from 1929–1945 and 1969–1982. We may be entering one of those periods. I think that is more likely than not. There may be other, better investment opportunities over the next 10 years. Maybe gold. Gold did pretty well from 1969–1982.

Bottom line: I am not so optimistic about the stock market on a long-term basis. And I think it’s because of a change in attitudes toward work and productivity. We have forgotten how to hustle.

Subscribe to The 10th Man here...