J.P. Morgan Unveils 2025 Long-Term Capital Market Assumptions, Highlighting Strong Foundations for 60/40 Portfolios and Opportunities to Enhance Returns Through Active Management and Alternatives
NEW YORK, Oct. 21, 2024 /PRNewswire/ -- J.P. Morgan Asset Management today released its 2025 Long-Term Capital Market Assumptions (LTCMAs), providing a comprehensive 10-15-year outlook for returns and risks across asset classes as the forces that drove volatility in recent years abate. These market assumptions guide investment decisions and conversations with institutional and high-net-worth clients, providing actionable insights for building resilient portfolios amid higher growth, increased capital investment, and rising geopolitical tensions.
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In this 29th edition of the LTCMAs, the forecast annual return for a USD 60/40 stock-bond portfolio over the next 10–15 years is projected at 6.4%, reflecting a slight dip from last year, while remaining above the long-term average. However, the report identifies significant opportunities to enhance this outlook, particularly through the use of active management and the inclusion of alternative assets. The long-term growth outlook has risen, driven by robust capital investment, advances in artificial intelligence (AI) and automation, and fiscal activism.
"Our Long-Term Capital Market Assumptions provide a roadmap for navigating the complexities of today's markets," said John Bilton, Head of Global Multi-Asset Strategy, J.P. Morgan Asset Management. "This year's findings underscore the value of active management and alternative asset classes in generating alpha and diversification. Investors are encouraged to incorporate assets that can navigate inflation shocks and fiscal risks, with bonds remaining essential for diversification."
"The global economy is entering a new era marked by higher fiscal spending, increased capital investment, and stronger economic growth," said Dr. David Kelly, Chief Global Strategist, J.P. Morgan Asset Management. "The overall outlook remains optimistic with investment levels picking up and rates normalizing. While inflation is expected to be slightly higher than pre-pandemic levels, the starting point for inflation is lower than in last year's forecasts, leading to modestly lower long-term inflation assumptions."
This year's report reinforces the importance of building goal-aligned portfolios that can withstand market volatility and seize growth opportunities," said Monica Issar, Global Head of J.P. Morgan Wealth Management Multi-Asset and Portfolio Solutions. "With significant opportunities emerging in infrastructure and other real assets, investors can leverage these sectors for stable income and to hedge against inflation."
Key findings include:
Inflation and Interest Rates: While inflation is expected to be slightly higher than pre-pandemic levels, the starting point for inflation is lower than in last year's forecasts, leading to modestly lower long-term inflation assumptions. Higher policy rates are projected to reinforce strong bond returns, with a cycle-neutral cash rate forecast of 2.8% for the U.S from 2.5% last year.
Opportunities in Private Markets: The report identifies a generational opportunity in global real estate, with U.S. core real estate return assumptions surging to 8.1%. Private equity and venture capital are expected to benefit from increased capital spending and technology adoption, despite higher financing costs.
Optimistic Growth Projections: Developed market growth forecasts have been modestly upgraded, with the U.S. expected to benefit from strong migration and AI-driven productivity gains. The report anticipates stronger economic growth driven by robust capital investment, technological advances, and fiscal activism.
Impact of Artificial Intelligence (AI): AI is expected to play a significant role in boosting productivity and economic growth. The report projects a 20bps annual boost to developed market growth from AI, potentially conservative given the transformative potential of the technology. The trend is expected to support higher revenue growth and margins, especially for U.S. large cap companies.
The report also outlines the following asset class return assumptions:
Fixed Income
U.S. intermediate Treasuries are expected to return 3.8%, while long Treasuries are expected to return 5.2%. Higher yields support these returns.
U.S. investment grade credit is forecast to return 5%, with spreads tightening due to higher growth expectations and improved creditworthiness.
U.S. high yield credit is expected to return 6.1%, with a fair value spread of 475bps, reflecting a normalization drag on returns.
Equities
U.S. large cap equities are expected to return 6.7%, down from 7.0% last year, even as valuations act as a 1.8% drag on returns over the investment horizon. The U.S. market's high quality characteristics and sector mix (including a powerful technology sector) may allow U.S. stocks to stay more expensive than their peers.
Global equities are projected to return 7.1% (USD), with non-U.S. markets offering more attractive cyclical starting points and benefiting from currency appreciation.
Emerging markets equities are expected to return 7.2% (USD), with a slight decrease due to lower growth expectations in China.
Alternatives
Private Equity: The return assumption for private equity is 9.9%, reflecting a slight increase due to a more favorable exit environment and higher growth opportunities in technology and AI.
Real Estate: U.S. core real estate is expected to return 8.1%, up from 7.5% last year, driven by attractive entry points and higher yields. European core real estate is forecast to return 7.6%.
Infrastructure: Global core infrastructure is projected to return 6.3%, reflecting stable returns and the essential nature of the services provided by this asset class.
Commodities: The return assumption for broad basket commodities remains at 3.8%, with the energy transition and geopolitical risks influencing the outlook.
The LTCMAs are the result of a rigorous research process that combines quantitative and qualitative inputs from over 100 industry-leading portfolio managers, research analysts, and strategists worldwide. These time-tested projections cover more than 200 assets and strategies in 19 base currencies, providing a robust foundation for strategic asset allocation and long-term investment planning.
View the full 2025 Long-Term Capital Market Assumptions here.
About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of $3.5 trillion (as of 9/30/2024), is a global leader in investment management. J.P. Morgan Asset Management's clients include institutions, retail investors and high net worth individuals in every major market throughout the world. J.P. Morgan Asset Management offers global investment management in equities, fixed income, real estate, hedge funds, private equity and liquidity. For more information: www.jpmorganassetmanagement.com.
About J.P. Morgan Private Bank
J.P. Morgan Private Bank provides customized financial advice to help wealthy clients and their families achieve their goals through an elevated experience. Clients of the Private Bank work with dedicated teams of specialists that bring their investments and financial assets together into one comprehensive strategy, leveraging the global resources of J.P. Morgan across planning, investing, lending, banking, philanthropy, family office management, fiduciary services, special advisory services and more. The Private Bank oversees more than $2.8 trillion in client assets globally (as of 9/30/2024). More information about J.P. Morgan Private Bank is available at privatebank.jpmorgan.com.
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