On the risk side, after 8 years of economic expansion there is a large probability for a recession in the next 5 years. Let’s say that there is a 50% chance of a recession in the next 5 years. Therefore, there is a 50% chance of getting the 5% expected yearly return from stocks and a 50% chance of seeing stocks fall by 50% as it was the case in the last two recessions. This means that for every $100, index investors are risking $50 for a potential return of $27 (5% cumulative return on $100 in five years).
