Asset manager lifts long-term investment return outlook

JPMorgan Asset Management has raised its projected annual return for a US dollar portfolio comprising 60% equities and 40% bonds to 7% over the next 10 to 15 years, from 6.4% in its previous outlook.

The bank’s 2027 Long-Term Capital Market Assumptions present a relatively positive investment outlook despite geopolitical uncertainty, supported by technological innovation, stronger productivity and higher bond yields.

The forecasts are intended for long-term portfolio planning rather than predicting returns over the coming year, Wealth Briefing reports.

JPMorgan also projects a 7.5% annual return for a portfolio incorporating a 30% allocation to diversified alternative investments. Its modelling indicates a 21% improvement in the Sharpe ratio, a measure of returns relative to risk, compared with the conventional stock-bond portfolio.

That alternative allocation forms part of the total portfolio and requires a reduction in other holdings; it is not an additional 30% layered onto an unchanged 60/40 split.

The firm expects both US large-company shares and global equities to return 7.5% annually in dollar terms.

Emerging-market equities are projected at 7.1%. Higher real yields have improved the bond outlook, with global aggregate bonds projected to return 5.3%, the strongest assumption in two decades.

JPMorgan nevertheless warns that inflation, interest rates and equity markets could become more volatile.

Closer and less stable relationships between stock and bond performance could also weaken the protection traditionally offered by a balanced portfolio.

For South African investors, these are dollar-based forecasts. Rand returns would additionally reflect exchange-rate movements, while fees and taxes would affect realised outcomes.

Sources: JPMorgan Asset Management, 2027 Long-Term Capital Market Assumptions and accompanying announcement, 19 October.