The McKinsey Institute urges professional and retail investors alike to reevaluate their expectations in their recent report; Diminishing returns: Why investors may need to lower their expectations. “Total returns on equities and bonds in the United States and Western Europe from 1985 to 2014 were significantly higher than the long-term average,” they said. “These returns were driven by an extraordinary confluence of favourable economic and business fundamentals.” They identify falling inflation and interest rates, favourable demographics, productivity gains, and rapid growth in China as being factors helping to push growth above long-term averages. As a result, they say “equities in [the USA and Western Europe], average annual returns could be anywhere from approximately 150 to 400 basis points lower, or 1.5 to 4.0 percentage points. For fixed-income, the gap could be even larger, with average annual returns between 300 to 500 basis points lower (3 to 5 percentage points), and in some cases even lower than that.” So what does this mean for investors?