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    1. Equity assumptions

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    Equity assumptions

    09-11-2020

    Christopher Sediqzad

    Patrik Schöwitz

    Tim Lintern

    Sylvia Sheng

    Emily Overton

    Mallika Saran

    Stephen Macklow-Smith

    Tougher starting point, lower returns

    IN BRIEF

    • We raise our long-term (10– to 15-year) equity return assumptions across most regions, with developed markets and emerging markets both up. The expected dispersion in returns between emerging and developed equities is roughly unchanged in local currency terms at 3.00%, while marginally expanding in U.S. dollar terms, from 2.75% to 2.90%.

    • In the U.S., our expected return increases to 5.60% from 5.25%, primarily due to the reduction in the drag from valuation normalization; in the euro area, our equity return estimates are slightly lower due to a modest cut to euro area GDP expectations. We upgrade our expected UK equity returns, with attractive valuations offsetting lower margins and a stronger pound sterling vs. the U.S. dollar.

    • Japanese equities posted the largest upgrade among developed markets, increasing from 5.00% to 5.50% in local terms. We continue to expect governance-led reforms to drive a sustainable increase in return on equity along with capital return to shareholders.

    • We project modestly higher emerging market equity returns, with a diminished drag from margin normalization offsetting the negative impact from several GDP growth downgrades.

    • We expect the USD to weaken over our forecast horizon, providing a tailwind to the attractiveness of international equity markets to U.S. dollar-based investors.

     



    This year, our equity return assumptions rise across most regions

    SELECTED DEVELOPED MARKET EQUITY LONG-TERM RETURN ASSUMPTIONS AND BUILDING BLOCKS

    Source: J.P. Morgan Asset Management; estimates as of September 30, 2018, and September 30, 2019.

    SELECTED EMERGING MARKET EQUITY LONG-TERM RETURN ASSUMPTIONS AND BUILDING BLOCKS

    Source: J.P. Morgan Asset Management; estimates as of September 30, 2018, and September 30, 2019.
    * China refers to MSCI China Index.

    DOWNLOAD THE FULL PDF

    View Other Assumptions

    Examine our return projections by major asset class, their building blocks and the thinking behind the numbers.
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    2021 Long-Term Capital Market Assumptions

    Discover the 2021 edition of J.P. Morgan's Long-Term Capital Market Assumptions, drawing on the best thinking of our experienced investment professionals.

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    LTCMA Matrices

    Our assumption matrices are designed to help evaluate the long-term risk and return trade-offs across and within asset classes and regions.

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