NEW
YORK, Oct. 21, 2024 /PRNewswire/ -- J.P. Morgan
Asset Management today released its 2025 Long-Term Capital
Market Assumptions (LTCMAs), providing a comprehensive
10-15-year outlook for returns and risks across asset classes as
the forces that drove volatility in recent years abate. These
market assumptions guide investment decisions and conversations
with institutional and high-net-worth clients, providing actionable
insights for building resilient portfolios amid higher growth,
increased capital investment, and rising geopolitical tensions.
In this 29th edition of the LTCMAs, the forecast annual return
for a USD 60/40 stock-bond portfolio
over the next 10–15 years is projected at 6.4%, reflecting a slight
dip from last year, while remaining above the long-term average.
However, the report identifies significant opportunities to enhance
this outlook, particularly through the use of active management and
the inclusion of alternative assets. The long-term growth outlook
has risen, driven by robust capital investment, advances in
artificial intelligence (AI) and automation, and fiscal
activism.
"Our Long-Term Capital Market Assumptions provide a roadmap for
navigating the complexities of today's markets,"
said John Bilton, Head of
Global Multi-Asset Strategy, J.P. Morgan Asset Management. "This
year's findings underscore the value of active management and
alternative asset classes in generating alpha and diversification.
Investors are encouraged to incorporate assets that can navigate
inflation shocks and fiscal risks, with bonds remaining essential
for diversification."
"The global economy is entering a new era marked by higher
fiscal spending, increased capital investment, and stronger
economic growth," said Dr. David Kelly, Chief Global
Strategist, J.P. Morgan Asset Management. "The overall outlook
remains optimistic with investment levels picking up and rates
normalizing. While inflation is expected to be slightly higher than
pre-pandemic levels, the starting point for inflation is lower than
in last year's forecasts, leading to modestly lower long-term
inflation assumptions."
This year's report reinforces the importance of building
goal-aligned portfolios that can withstand market volatility and
seize growth opportunities," said Monica
Issar, Global Head of J.P. Morgan Wealth Management
Multi-Asset and Portfolio Solutions. "With significant
opportunities emerging in infrastructure and other real assets,
investors can leverage these sectors for stable income and to hedge
against inflation."
Key findings include:
- Inflation and Interest Rates: While inflation is
expected to be slightly higher than pre-pandemic levels, the
starting point for inflation is lower than in last year's
forecasts, leading to modestly lower long-term inflation
assumptions. Higher policy rates are projected to reinforce strong
bond returns, with a cycle-neutral cash rate forecast of 2.8% for
the U.S from 2.5% last year.
- Opportunities in Private Markets: The report
identifies a generational opportunity in global real estate, with
U.S. core real estate return assumptions surging to 8.1%. Private
equity and venture capital are expected to benefit from increased
capital spending and technology adoption, despite higher financing
costs.
- Optimistic Growth Projections: Developed market
growth forecasts have been modestly upgraded, with the U.S.
expected to benefit from strong migration and AI-driven
productivity gains. The report anticipates stronger economic growth
driven by robust capital investment, technological advances, and
fiscal activism.
- Impact of Artificial Intelligence (AI): AI is
expected to play a significant role in boosting productivity and
economic growth. The report projects a 20bps annual boost to
developed market growth from AI, potentially conservative given the
transformative potential of the technology. The trend is expected
to support higher revenue growth and margins, especially for U.S.
large cap companies.
The report also outlines the following asset class return
assumptions:
- Fixed Income
- U.S. intermediate Treasuries are expected to return 3.8%, while
long Treasuries are expected to return 5.2%. Higher yields support
these returns.
- U.S. investment grade credit is forecast to return 5%, with
spreads tightening due to higher growth expectations and improved
creditworthiness.
- U.S. high yield credit is expected to return 6.1%, with a fair
value spread of 475bps, reflecting a normalization drag on
returns.
- Equities
- U.S. large cap equities are expected to return 6.7%, down from
7.0% last year, even as valuations act as a 1.8% drag on returns
over the investment horizon. The U.S. market's high quality
characteristics and sector mix (including a powerful technology
sector) may allow U.S. stocks to stay more expensive than their
peers.
- Global equities are projected to return 7.1% (USD),
with non-U.S. markets offering more attractive cyclical
starting points and benefiting from currency appreciation.
- Emerging markets equities are expected to return 7.2% (USD),
with a slight decrease due to lower growth expectations in
China.
- Alternatives
- Private Equity: The return assumption for private
equity is 9.9%, reflecting a slight increase due to a more
favorable exit environment and higher growth opportunities in
technology and AI.
- Real Estate: U.S. core real estate is expected to
return 8.1%, up from 7.5% last year, driven by attractive entry
points and higher yields. European core real estate is forecast to
return 7.6%.
- Infrastructure: Global core infrastructure is
projected to return 6.3%, reflecting stable returns and the
essential nature of the services provided by this asset class.
- Commodities: The return assumption for broad basket
commodities remains at 3.8%, with the energy transition and
geopolitical risks influencing the outlook.
The LTCMAs are the result of a rigorous research process that
combines quantitative and qualitative inputs from over 100
industry-leading portfolio managers, research analysts, and
strategists worldwide. These time-tested projections cover more
than 200 assets and strategies in 19 base currencies, providing a
robust foundation for strategic asset allocation and long-term
investment planning.
View the full 2025 Long-Term Capital Market
Assumptions here.
About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of
$3.5 trillion (as of 9/30/2024), is a
global leader in investment management. J.P. Morgan Asset
Management's clients include institutions, retail investors and
high net worth individuals in every major market throughout the
world. J.P. Morgan Asset Management offers global investment
management in equities, fixed income, real estate, hedge funds,
private equity and liquidity. For more information:
www.jpmorganassetmanagement.com.
About J.P. Morgan Private Bank
J.P. Morgan Private Bank provides customized financial advice to
help wealthy clients and their families achieve their goals through
an elevated experience. Clients of the Private Bank work with
dedicated teams of specialists that bring their investments and
financial assets together into one comprehensive strategy,
leveraging the global resources of J.P. Morgan across planning,
investing, lending, banking, philanthropy, family office
management, fiduciary services, special advisory services and more.
The Private Bank oversees more than $2.8 trillion in
client assets globally (as of 9/30/2024). More information about
J.P. Morgan Private Bank is available at
privatebank.jpmorgan.com.
JPMorgan Chase & Co. (NYSE: JPM) is a leading financial
services firm based in the United States
of America ("U.S."), with operations worldwide.
JPMorganChase had $4.2 trillion in
assets and $346 billion in
stockholders' equity (as of 9/30/2024). The Firm is a leader in
investment banking, financial services for consumers and small
businesses, commercial banking, financial transaction processing
and asset management. Under the J.P. Morgan and Chase brands, the
Firm serves millions of customers in the U.S., and many of the
world's most prominent corporate, institutional and government
clients globally. Information about JPMorgan Chase & Co. is
available at www.jpmorganchase.com.
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SOURCE J.P. Morgan Asset Management