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Strong equity returns of the past unlikely to continue

The forecast for global growth has yet again been downgraded, this time by the International Monetary Fund (IMF) to 3.3%, the slowest pace of growth since the global economy shrank during the recession in 2009. This downgrade by the IMF includes the Canadian economy, which, due in part to lower oil prices, is now expected to grow at 1.5% in 2015 (down from 2.3% at the beginning of the year). Even forecast U.S. growth has been cut to 2.5% from 3.1%.

With such a backdrop, combined with the political theatre that played out between Greece and the European Union, it seems like an opportune time to revisit the prospects for equity market returns.

There has been a large disconnect between the global economic recovery and equity market returns. Developed equity markets now stand above pre-crisis highs and credit markets have seen their spreads fall substantially. Even with the most recent market corrections, savvy investors have made a lot of money over the past few years.

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