Capital Market Assumptions: Expected Returns

 

The attached chart shows an extract from our capital market assumptions data set.  Expected returns like the ones shown below are used by asset allocators in setting long-term strategic asset allocation benchmarks.  Thus while the absolute level of the individual expected return of each asset class is interesting and relevant, the relativities often provide the most interesting and compelling influence on asset allocation decisions and ultimate portfolio mixes.  For example stocks vs fixed income, cash vs bonds, global vs US.

The expected returns are not designed to give an exact forecast, but a general best guess based on our understanding of longer-term return drivers and the current market realities (such as valuations and yields).  The goal is to both describe the absolute expected return environment and expose the relative attractiveness of assets. 

Latest update: 30 June 2021  -- SEE VIDEO: explanation & workings on US Equities

capital market assumptions extract jun 2021.PNG

 

NOTE: the expected returns shown above (US equities, Developed ex-US equities, emerging market equities, US treasuries, and US cash) come from our full capital market assumptions data set (more than 25 asset classes) which is provided to our clients. 

 

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