The New Year has begun with significant financial-market volatility as a variety of risks cloud the short-term outlook. But history suggests that growth in economies and corporate profits ultimately prevails over the longer term and, as we look past near-term challenges to the very long-term view, return potential for stocks and bonds remains appealing. We recognize, though, that stocks have had a great run over the past couple of years and valuations have swelled especially in U.S. large-cap growth stocks. As a result, our long-term return expectations have moderated across a variety of equity-market regions, most prominently in the U.S.
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