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Capital Market Assumptions: A Comprehensive Global Approach for the Next 20 Years
Capital Market Assumptions: A Comprehensive Global Approach for the Next 20 Years
Fidelity's Asset Allocation Research Team believes that asset returns over the next 20 years will be lower than their long-term averages, with stocks outperforming bonds and emerging markets generating the highest returns.
Our capital market assumptions framework focuses on the specifics of how economic and financial market inputs influence asset returns over long periods of time. While other approaches assume the connection between GDP growth and asset returns is either perfect or non-existent, our framework is built on two beliefs:
1) There is a principal relationship between economic trends and asset-class performance.
2) By deriving country-specific assumptions, we generate estimates that are global and adaptive across diverse economies and asset categories.
For illustrative purposes only. Source: Fidelity Investments (AART).
Key Takeaways
- Our long-term capital market assumption for U.S. equities is below long-term average returns due to lower growth potential and higher starting valuations.
- Emerging-markets stocks represent the most attractive area for public market return expectations due to favorable growth prospects and better starting valuations.
- Fixed income return expectations are higher compared with 2021 due to higher starting bond yields.
- These materials contain statements that are "forward-looking statements," which are based upon certain assumptions of future events. Actual events are difficult to predict and may differ from those assumed. There can be no assurance that forward-looking statements will materialize or that actual returns or results will not be materially different than those presented.