How to Invest for the Next Decade

This year has been a firehouse of market-moving news, keeping volatility high and investors focused on the here and now. But sometimes it pays to zoom out and take a long-term perspective. That can be especially true in investing. 

The latest issue of Barron's includes a special section all about taking the long view. It includes a package of stories identifying strategies and trends—as well as stock, bond, and fund picks—that we expect to work for the next 10 years.

After the 2008-09 financial crisis, the U.S. economy was characterized by slow economic growth, low inflation, rock-bottom interest rates, and quantitative easing by central banks across the globe. It was a Goldilocks environment, particularly for financial assets with longer duration—essentially those with a greater share of their cash flows occurring far off in the future. That includes long-dated government and corporate bonds, but also shares of growth-oriented companies.

Led by a narrow group of Big Tech stocks, the S&P 500 returned 16% a year from the start of 2009 through the end of 2021. Bonds rose in value, but yielded very little. 

“We’re super excited about what the next decade looks like for investors,” says Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management. “It looks very different from the past 14 years. The opportunities are much more diversified and broader.”

In the next market cycle, stock and bond indexes are projected to have low-single digit returns. Cash-generating investments are back in vogue for the next decade. Higher volatility adds greater uncertainty to future predictions, while higher interest rates mean that far-off cash flows are worth less when discounted back to the present, and securing financing is more expensive.

That dynamic means the universe of potential winning stocks should include value-oriented sectors. Meanwhile, fixed income is actually providing some income for the first time in almost 15 years. 

Megatrends that will unfold or accelerate over the next decade include the transition to green energy, and strategists are bullish on opportunities to invest there. But don't count out fossil fuels just yet. 

"Deglobalization,” or the rethinking of vulnerable, globe-spanning supply chains, is already under way. That will be a headwind to multinationals and contribute to higher inflation, but could also be a long-term boost for certain emerging markets economies. 

And, in contrast to the past decade, success won’t go only to the companies making technology, but also to those using it to become more productive, efficient, and competitive. “Moving forward, we think the new winners are not necessarily going to be about the tech makers, but the tech takers,” says Shalett.