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EQUITY MARKET ASSUMPTIONS

IN BRIEF

  • After several years of steadily lower expected returns, this year our equity return assumptions generally hold firm, with developed markets unchanged, emerging markets up and the U.S. slightly down. The expected dispersion in returns between emerging and developed equities widens to 3.00% in local FX terms and 2.75% in USD terms.
  • In the U.S., our expected return falls modestly, mostly due to this year’s cut to our U.S. inflation forecast and the knock-on impact on domestic nominal GDP; in the euro area, UK and Japan, our equity return estimates rise slightly.
  • Central to our view on Japanese equities is the expectation that governance-led reforms are likely to drive a sustainable increase in return on equity (ROE), along with greater capital returns to shareholders.
  • We project moderately higher emerging market equity returns, supported by lower starting valuations and higher GDP (and thus earnings) growth.
  • We still expect the USD to weaken over our forecast horizon, providing a significant tailwind to the attractiveness of international equity markets to U.S. dollar-based investors.
  • Return of capital to shareholders in the form of dividends and buybacks is expected to be a crucial component of future returns.

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Breaking with the pattern of recent years, this year our equity return assumptions generally hold firm

SELECTED DEVELOPED MARKET EQUITY LONG-TERM RETURN ASSUMPTIONS AND BUILDING BLOCKS
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Source: J.P. Morgan Asset Management; estimates as of September 30, 2017 and September 30, 2018.

SELECTED EMERGING MARKET EQUITY LONG-TERM RETURN ASSUMPTIONS AND BUILDING BLOCKS
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Source: J.P. Morgan Asset Management; estimates as of September 30, 2017 and September 30, 2018.


VIEW OTHER ASSUMPTIONS

Examine our return projections by major asset class, their building blocks and the thinking behind the numbers.
 
 
 


2019 Long-Term Capital Market Assumptions

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