8/25/2023 0 Comments Serial key unlock worldIn local currency terms, our developed market equity forecast rises 340 basis points (bps), to 7.80%, and in emerging markets jumps 230 bps, to 8.90%. Higher riskless rates also translate to improved credit return forecasts. Once again, they offer a plausible source of income as well as diversification. Our forecast annual return for a USD 60/40 stock-bond portfolio over the next 10–15 years leaps from 4.30% last year to 7.20%.Īfter policy rates normalized swiftly, bonds no longer look like serial losers. We expect today’s inflationary surge to eventually subside to a rate only slightly above our previous estimates. Still, our assessment of long-term trend growth is only marginally below last year’s. In the near term, investors face a challenging time as a recession, or at least several quarters of subtrend growth, lie immediately ahead. Meanwhile, the end of free money, greater two-way risk in inflation and policy, and increased return dispersion across assets also give active managers more to swing for. Once again, 60/40 can form the bedrock of portfolios, while alternatives can offer alpha, inflation protection and diversification. It took a painful slump in stock and bond markets to get here, and the worst may not yet be over.īut after a year of turmoil, the core principles of investing still hold firm. Lower valuations and higher yields mean that asset markets today offer the best long-term returns in more than a decade.
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