A decade of stagnation scarier than rising rates?

Good piece in the Globe by Ian McGugan posted Monday night. When I tweeted it out this morning, it was retweeted by some prominent Tweeters. McGugan — back to writing after years of being an editor at MoneySense and the Globe — suggests a major threat for investors is “the possibility that nothing happens … nothing as in a stagnant market, not just for a year or two, but for a decade or more to come.”

Citing the work of Boston-based Ben Inker (of GMO), McGugan says that if interest rates and bond yields remain stubbornly low, it may be hard for institutional investors (pension funds) to generate a return of inflation plus 5%. Stock investors need to be more cautious because the expected reward for taking on risk is getting muted. Long-term returns from both stocks and bonds may disappoint and investors may be lucky to get a 3.5% real return: net of inflation but before taxes and fees.

Scary indeed! But Inker doesn’t suggest parking in cash, seeing some value in the less obvious emerging markets, European value stocks and high-quality American companies.