Little change in risk assumptions
Our 2018 Long-Term Capital Market Assumptions volatility projections are generally unchanged from 2017 estimates, despite a currently low asset volatility environment. Clearly, volatility in financial markets has been running at historically low levels, particularly for risk assets and most notably for equities. This low volatility may prompt some to ask if structural changes in asset volatility have taken place. As we will show, we find little evidence to support this conjecture. In our view, currently low asset volatility levels are in line with the late phase of the business cycle we are in—and we see little need to adjust our forward-looking estimates downward.
Asset volatilities are near historical lows, but in line with this late phase of the business cycle
ONE-YEAR ROLLING REALIZED VOLATILITY OF GLOBAL EQUITIES AND FIXED INCOME (%)*
Source: Bloomberg Barclays, Deutsche Börse AG, FTSE Russell, MSCI, Standard & Poor’s, J.P. Morgan Asset Management; data as of July 31, 2017.
*U.S. large cap equities based on S&P 500 returns; U.S. small cap equities based on Russell 2000 returns; EAFE equities based on MSCI EAFE returns; German equities base on DAX returns; U.S. fixed income based on Bloomberg Barclays U.S. Aggregate returns.
View other assumptionsExamine our return projections by major asset class, their building blocks and the thinking behind the numbers.
ABOUT LONG-TERM CAPITAL MARKET ASSUMPTIONS
Our Long-Term Capital Market Assumptions are part of a deeply researched proprietary process that draws on in-depth quantitative and qualitative inputs from experts across J.P.Morgan Asset Management. We, and many of our clients, rely on the output as a foundation for multi-asset class investing.