Global asset returns are expected to be in the “modest” single-digits over the next ten to 15 years as a sharp slowdown in China drags down the global economy, according to forecasts by JP Morgan Asset Management (JPMAM).
Long-term returns from stocks and alternative assets will probably increase from 2019 levels.
But the outlook for bonds appears bleak, with the return on US investment grade debt expected to decline more than one percentage point as investors reconsider the traditional view of such securities as so-called safe havens amid low interest rates, JPMAM says in a statement on November 7.
The company forecasts China’s economic growth to decelerate to an average 4.4% annually over the next ten to 15 years from the double-digit pace of recent decades, which is expected to have a spillover impact on other Asian economies and stock markets.
It predicts a 6.5% average return for global stocks in US dollars over the next ten to 15 years, up from the 6% expected this year.
The increase takes into account cheaper starting valuations in developed markets, and a more even split between earnings and valuations in emerging markets.
JPMAM raised the long-term return forecast for alternative assets by 55 basis points to 8.8%, saying that private equity “continues to be attractive to those investors looking for return uplift, as well as those seeking more specific exposure to technology themes”.
But it expects the long-term return on US investment grade bonds to decline to 3.4%, from 4.5% in 2019.
“Investors are rethinking safe havens in their portfolios now that bonds simply will not offer the same combination of portfolio protection and positive income that they have in the past,” Patrik Schöwitz, global multi-asset strategy at JPMAM, says in the statement.
JPMAM had US$1.9 trillion of total assets under management as of September 2019.