Antti Is (Still) Trying to Understand Return Expectations

Antti Ilmanen’s new series, Understanding Return Expectations, explores not just what future returns are likely to be, but how investors actually form their beliefs about those returns. He contrasts academically grounded estimates, which often point to low expected returns at high valuations, with survey-based expectations that tend to be most optimistic precisely when markets are most expensive. The series shows how many investors fall into a “rearview mirror” mindset, extrapolating recent strong performance and growth into the future and confusing rich past returns with attractive forward-looking opportunities.

Ilmanen highlights that this bias is especially acute in equities and among individual investors and analysts, while institutional and bond investors appear somewhat more disciplined. For advisors and allocators today, his work underscores the importance of anchoring expectations in objective valuation metrics rather than recent trends, recognizing when optimism has outrun fundamentals, and leaning into contrarian positioning when growth narratives become unrealistic.