Forecasting 7% long-term real returns from the current state of the S&P 500 ignores the current environment - the S&P 500 is currently priced very highly relative to historical prices.

There's an interesting bit of analysis that estimates an upper bound of 3.8% -- 3.95% real returns from US Equities. Worth a read.

> Valuations today are in the 97th percentile of all valuations in history and the 83rd percentile of valuations over the last twenty years (itself a period of very high valuations). Rather than assume that they will revert back to some past average, let’s start by granting the very bullish assumption that they will remain exactly where they are today forever.

http://www.philosophicaleconomics.com/2018/01/future-u-s-equ...

Edit: the same blog that has a great post "The Single Greatest Predictor of Future Stock Market Returns" which goes beyond "mean reversion" of equity valuations, to show how you can make a better explanation (and better long term forecasts) by considering supply and demand dynamics as investors, on average, shift their allocations of investments between equities, bonds and cash.

As previously discussed on HN: https://news.ycombinator.com/item?id=14948078

"The Single Greatest Predictor of Future Stock Market Returns": https://news.ycombinator.com/item?id=14948078

And here's the live (well, lagging a few months, but this is a very slow signal anyhow) version: https://news.ycombinator.com/item?id=14950203