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Now that we’re almost 10 years into the second longest economic expansion in U.S. history, many analysts expect lower equity returns over the next decade than the previous one from this high point.

Stocks are expensive, and late-cycle elements are building in the economy. For example, the following chart shows the Wilshire U.S. stock market index (red line) compared to historical unemployment rates (blue line, scaled up), with recessions shaded in gray:

Chart Source: Bureau of Labor Statistics, Wilshire Associates, charted at the St. Louis Federal Reserve

However, it’s always very difficult to predict the exact timing or magnitude of how things will play out.

Vanguard’s chief investment officer, Greg Davis, told CNBC this past week that Vanguard now expects about 5% average annual returns over the next decade for U.S. equity markets, which would include the C Fund and S Fund. This is reduced from 8% expected returns that they had a few years ago, now that we’re later and higher in the economic cycle.

Vanguard was founded in 1975 by Jack Bogle, who invented and popularized the concept of the index fund. Rather than trying to beat the market, an index fund matches the market with very low fees. All funds in the TSP besides the G Fund are index funds and are thus based on his work.

Bogle passed away in January at the age of 89, and a couple weeks before his passing he gave an interview with Barron’s where he made a cautionary recommendation:

“Trees don’t grow to the sky, and I see clouds on the horizon. I don’t know if and when they’ll arrive. A little extra caution should be the watchword. If you were comfortable at a 70 percent to 30 percent [allocation to stocks and fixed income], under these circumstances you’d like to go back to 60 percent to 40 percent, or something like that.”

In other words, he recommend that it’s time to get a little bit more defensive. That doesn’t mean going overboard, though. He cautioned specifically against making big changes to try to time the market, like moving everything to cash. Instead, he merely offered the suggestion that a little more caution than normal is warranted at this point in time.

If nothing else, predictions like this are useful for setting expectations. G Fund interest rates are perpetually low, and equity returns aren’t expected to be very high over the next ten year period.

When saving for retirement, you should likely plan for low returns, which means trying to save more money. Erring on the side of caution is rarely a bad idea in finance as long as you maintain diversified holdings. It’s better to save more and end up with better returns than you expected, than to base your retirement savings on the idea of 10% returns and come up short.

Lyn Alden is a financial writer and an engineer, and holds a bachelor’s in engineering and a master’s in engineering management, with a focus on financial modeling and resource management. She specializes in analyzing and presenting financial data. Her investment work can be found on LynAlden.com.