If greed is successful it would not be surprising for the market to be "Jacked Up" to where the 10yr estimated average annual return falls below 0%. At a negative return owning stocks would be a loser's bet.

Market Peaks are a Process 
John P. Hussman, Ph.D.

It’s fascinating how investors come to forget that markets move in cycles and not perpetual diagonal lines. As value investor Howard Marks wrote in The Most Important Thing, "Rule number one: most things will prove to be cyclical. Rule number two: some of the greatest opportunities for gain and loss come when other people forget rule number one." A normal, run-of-the mill cyclical bear market wipes out more than half of the preceding bull market advance. We should not be surprised at all to see the S&P 500 back at 2010 levels or below over the completion of the present cycle. From a valuation standpoint, we estimate that the S&P 500 Index would have to fall to the 1000 level to bring prospective 10-year nominal total returns toward their historical norm of about 10% annually. With the exception of the 2000-2002 bear market, valuations have typically been lower, and prospective returns higher, at cyclical troughs throughout recorded history (even in data prior to the 1960’s when interest rates were similarly depressed).  Not that we need to forecast such an outcome, and certainly not that we would require anything near historical valuation norms to encourage a constructive stance, provided support from other factors. As always, the strongest prospective market return/risk profile is associated with a material retreat in valuations followed by an early improvement in broad measures of market internals. 

On Friday, our estimate of prospective 10-year S&P nominal total returns set a new low for this cycle, falling below 2.2% annually. This is worse than the level observed at the 2007 market peak, or at any point in history outside of the late-1990's market bubble. It's possible that investors could drive prospective returns even lower than they are now, and valuations even higher than they are now, as investors did during that bubble. Still, even that advance started to be punctuated by abrupt vertical declines or "air pockets" once overvalued, overbought, overbullish features emerged (recall for example the increasingly frequent and distinct peak-trough corrections of 10% or more in Oct 1997, Jul-Oct 1998, Jul-Oct 1999, Jan-Feb 2000, Mar-Apr 2000, and Sep-Oct 2000 even before more severe losses got underway). See Setting the Record Straight for a general review of current valuations and prospective returns.

DYI Comments:  Why anyone would have more than 25% in common stocks [except for mining stocks] is beyond my understanding.  Greed, fear and complacency are the master's of the market.  Currently, complacency is in charge with greed attempting to take over.  If greed is successful it would not be surprising for the market to be "Jacked Up" to where the 10yr estimated average annual return falls below 0%.  At a negative return owning stocks would be a loser's bet.

Here is DYI's estimated return based upon dividends:

Estimated 10yr return on Stocks

Using 5.4% as the historical growth rate of dividends and 4.0% as the ending yield.

Starting Yield*---------return**
1.0%-----------------------(-5.7%)
1.5%-----------------------(-1.7%) 

2.0%---------1.3%  You are Here!

2.5%------------------------3.8%

3.0%------------------------5.9%
3.5%------------------------7.8%
4.0%------------------------9.4%
4.5%-----------------------10.9%

5.0%-----------------------12.3%
5.5%-----------------------13.6%
6.0%-----------------------14.8%
6.5%-----------------------15.9%

7.0%-----------------------17.0%
7.5%-----------------------18.0%
8.0%-----------------------19.0%

*Starting dividend yield of the S&P500-**10yr estimated average annual rate of return.

AGGRESSIVE PORTFOLIO - ACTIVE ALLOCATION - 06/1/14

Active Allocation Bands 10% to 60%

45% - Cash -Short Term Bond Index - VGPMX

25% -Gold- Precious Metals & Mining - VBIRX

20% -Lt. Bonds- Long Term Bond Index - VBLTX

10% -Stocks- Equity Income Fund - VEIPX

[See Disclaimer]

DYI