Asset Class Returns Forecasts - Q4 2023

Recent geopolitical events and macroeconomic progresses are rising uncertainty on the global outlook and led to some adjustments on the short-term trajectory within our simulation horizon. 

  • This quarter starts with higher valuation and more uncertainty across the asset universe. We have slightly revised our short-term outlook assumptions factoring in a mild recession in the US in 1H2024 and a faster transition of China towards a slower growth regime.
  • Our long-term model assumptions are characterised by a disorderly energy transition that integrates secular trends and uncertainty (see our annual publication “A rocky net zero pathway”), both affecting price patterns and volatility. Interest rates will normalise in the long-run on upward sloping and curves. Equity returns will be characterised by lower earnings growth and lower valuation.
  • From a strategic standpoint, high-quality fixed income assets (government bonds and high-grade credit) can deliver attractive returns. This quarter we have reinforced our expectations over a 10-year horizon because of improved starting valuations. Equity expectations were revised upward across the board, especially on developed markets (excluding Japan).
  • In the real and alternative assets space, Global Private Debt and Hedge Funds confirm their attractive risk/return trade-off, even when compared to asset classes with similar levels of risk (such as HY Credit and Real Estate).

You can now read the full whitepaper at the link below