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IN BRIEF

  • Our equity assumptions project lower expected returns in developed and emerging markets. In line with recent years, we see returns over our time horizon falling modestly but steadily behind what historical experience would suggest. The gap between emerging and developed market equity returns narrows somewhat from our last edition in U.S. dollar (USD) terms.
  • Another year of strong equity performance has coincided with an expansion of corporate profit margins relative to long-run averages. Across most markets, our return assumptions also continue to face valuation headwinds, notably in the U.S., and anticipated pressure on corporate profit margins.
  • Our view on Japanese equities remains unchanged despite strong performance, as we raise our view of achievable long-term margins and valuations. Despite slow GDP growth, we believe changing corporate behavior in Japan will produce greater capital returns to shareholders. Our euro area assumption falls modestly; our expected U.S. and UK returns fall slightly more.
  • Our emerging market (EM) equity return assumptions decline moderately, driven by a fall in emerging Asia return expectations, stemming from our presumption of lower GDP (and thus earnings) growth, as well as higher valuations. In contrast, assumptions for Europe, the Middle East and Africa (EMEA) and Latin America are largely unchanged in aggregate local currency terms, although EMEA USD returns suffer from a foreign exchange downgrade.
  • The return of capital to shareholders in the form of dividends and buybacks will be a crucial component of future returns. We continue to forecast that a high proportion of earnings, relative to historical averages, will be distributed.
  • We introduce assumptions for global convertible bonds and global credit-sensitive convertible bonds.
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Our equity assumptions call for modestly lower expected returns, in line with the pattern of recent years

SELECTED DEVELOPED MARKET EQUITY RETURN ASSUMPTIONS AND BUILDING BLOCKS
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Source: J.P. Morgan Asset Management; estimates are as of September 2017.
 
SELECTED EMERGING MARKET EQUITY RETURN ASSUMTPIONS AND BUILDING BLOCKS
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Source: J.P. Morgan Asset Management; estimates are as of September 2017.
 

View other assumptions

Examine 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.

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