Active investment manager Capital Group has lowered its 20-year estimates for equities and bonds from last year but says its overall outlook is still positive for long term investors across global markets.
Its recently issued 2025 Capital Market Assumptions, represent the company’s long-term expectations for returns, as well as correlations and volatilities of major asset classes over a 20-year time horizon.
Talking to the assumptions, Maddi Dessner, head of asset class services at Capital Group, Sid: “The outsized returns on equities over the past two years, increasing markets concentration and high stock valuations are factors we need to consider as we think about long term portfolio construction.
“While we’ve lowered our return expectations for global equities, we expect to continue to see bright pockets of opportunity driven by structural and cyclical factors. We expect fixed income returns to exceed what was realised over the last 20 years.”
Alexandra Haggard, head of asset class services for Europe and Asia at Capital Group, added: “Despite the geopolitical landscape having shifted quite significantly with elections held last year in 64 countries and the European Union, overall prospects for economic growth around the world remain healthy.”
“An uptick in capital expenditure, especially in developed markets, the deepening of capital markets and the productivity enhancements from artificial intelligence and a broader adoption of digitisation across the world are expected to support growth in both developed and emerging markets.”
Source: Capital Group. Year-end expected returns 2024 are as of December 31, 2024, with valuations as of September 30, 2024.
Capital Group’s 2025 capital market assumptions are available here.
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