The forecasted annual return for a USD 60/40 stock-bond portfolio over the next 10–15 years remains attractive at 7.0%, according to JP Morgan Asset Management’s 2024 Long-Term Capital Market Assumptions (LTCMAs).
However there are clear opportunities to boost this outlook, the report indicated.
“For instance, simply adding a 25% al__cpLocation to alternative assets can boost 60/40 returns by 60 basis points and improve the Sharpe ratio by approximately 12%. The long-term growth outlook has risen slightly, driven by the positive productivity impact of automation and artificial intelligence, while the energy transition and emergence of new technologies have the potential to offer investment opportunities.”
LTCMAs are used to underpin investment decisions and conversations with asset and wealth management clients, providing a 10-15-year outlook for risks and returns across asset classes.
The research provides actionable insights as investors look to build smarter portfolios in the midst of a transition from disinflation to reflation, and from policy accommodation to higher costs of capital.
“The world is entering a period of significant economic transition in the wake of the global pandemic and heightened geopolitical tension with far-reaching implications for investors. We are moving away from an environment with persistent disinflation, ultra-easy monetary policy, and fiscal restraint,” said John Bilton, Head of Global Multi-Asset Strategy, J.P. Morgan Asset Management.
“This transition requires investors to build robust portfolios to meet these challenges by extending out of cash and benchmarks to harvest better returns, and expanding opportunity sets into alternatives and through greater international exposure to enhance returns and diversification.”
“After raising our inflation forecasts significantly in the past two years, changes in this year’s LTCMAs are more nuanced outside of a few major economies, most notably Europe and Japan,” said Tilmann Galler, Global Market Strategist, J.P. Morgan Asset Management. “The outlook for developed market growth has risen slightly, driven by the productivity enhancing impacts of artificial intelligence, while forecasts in emerging markets have dipped slightly due to lower trend growth in China.”
“You’ll often hear investors wish for a crystal ball during unpredictable markets. The LTCMAs provide a roadmap to steer through those moments and support our client’s long-term investment goals. This year, the findings tell a strong story for clients on the power of diversification in an ever-changing world, answering some of the key questions on everyone’s mind right now,” said Grace Peters, Global Head of Investment Strategy, J.P. Morgan Private Bank. “The process of building goal-aligned portfolios for our clients is powered by the institutional firepower that the LTCMAs provide – whether they are just starting on their journey or planning for future generations.”
