Annual returns of U.S. stocks over the next decade are forecasted to be in the “modest 3.7%-5.7% range,” according to a recent market outlook report from Vanguard. This implies an equity risk premium (ERP) in the range of 2.2% to 4.2%, assuming a risk-free rate of 1.5% (the 20-year T-bond spot rate at the time of this writing). The forecast of stock returns “is quite different from the 10.6% annualized return generated over the last 30 years,” the report says. Some analysts believe that the past is not reflective of the future, so they do not use an ERP based on historical returns. The ERP is a forward-looking concept based on the expected excess return on the stock market, so they use a forward-looking (“implied”) ERP. An implied ERP represents investment expectations as of a particular point in time, which is what analysts are trying to determine.