Long-term capital market assumptions (LTCMA) form a vital component of some systematic long-term asset allocation approaches. This report highlights significant developments to our 10-year forecasts since the last review, and the impact of macroeconomic developments, monetary policy and yields. Select LTCMA are summarized across equities, fixed income and commodities.

We see growth and income return potential as interesting across risk assets. A more normalized yield environment after years of quantitative easing is likely to support fixed income but the speed and size of monetary policy adjustments could be a swing factor and a number of other “known” and “unknown” unknowns could impact these forecasts. A modest decline in our overall return forecasts is due to tighter valuations compared to last year, rather than a marked change in the overall environment. 

 

Key takeaways:

  • Normalized yield environment after years of quantitative easing is likely to support fixed income.
  • Growth and income return potential is interesting across risk assets.
  • Modest decline in overall return forecasts is due to tighter valuations compared to last year.

 

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No assurance can be given that any forecast or target can be achieved. Forecasts are based on assumptions, estimates, opinions and hypothetical models which may prove to be incorrect. Past performance is not indicative of future returns. Performance refers to a nominal value based on price gains/losses and does not take into account inflation. Inflation will have a negative impact on the purchasing power of this nominal monetary value. Depending on the current level of inflation, this may lead to a real loss in value, even if the nominal performance of the investment is positive.

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