A 60/40 stock-bond portfolio is projected to yield an annual return of 6.4% in US dollar terms over the next 10–15 years, a slight dip from last year but still above the long-term average, J.P. Morgan Asset Management (JPMAM) says in its latest outlook.
In its 2025 Long-Term Capital Market Assumptions (LTCMAs), JPMAM identifies significant opportunities to enhance this outlook, particularly through the use of active management and the inclusion of alternative assets. In fact, the long-term outlook has risen, driven by robust capital investment, advances in artificial intelligence (AI) and automation, and fiscal activism, it says.
“Within Asia-Pacific, we see unique opportunities in both public and private markets. Japanese equities, in particular, have been one of the top performers, with margins and return-on-equity close to all-time highs,” says Sylvia Sheng, global multi-asset strategist at JPMAM.
“Supported by ongoing corporate governance reforms and increased shareholder returns, we expect continued robust performance and maintain our conviction in Japanese equities.”
Strong bond returns
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, the report says.
Higher policy rates are projected to reinforce strong bond returns, with a cycle-neutral cash rate forecast of 2.8% for the United States, from 2.5% last year.
The report identifies a generational opportunity in global real estate. Private equity and venture capital are also expected to benefit from increased capital spending and technology adoption, despite higher financing costs.
JPMAM sees AI playing a significant role in boosting productivity and economic growth. It projects a 20bp annual boost to developed market growth from AI, which may even be conservative given the transformative potential of the technology.
The trend is expected to support higher revenue growth and margins, especially for large-cap companies in the United States, as well as in Taiwan and South Korea within the APAC region.
Higher fiscal spending
"The global economy is entering a new era marked by higher fiscal spending, increased capital investment, and stronger economic growth," says Tai Hui, APAC chief market strategist at JPMAM. “We have upgraded our growth assumptions for some emerging market (EM) economies, including Taiwan and Korea, the likely beneficiaries of an AI investment boom, as well as India due to the supportive demographics and ongoing infrastructure investment, making it the fastest growing EM economy covered by the LTCMAs for over a decade.”
Yvonne Leung, Asia head of managed solutions at J.P. Morgan Private Bank, highlights the importance of building goal-aligned portfolios that can withstand market volatility and seize growth opportunities.
“With significant opportunities emerging in infrastructure and other real assets, investors can leverage these sectors for stable income and to hedge against inflation with rates remaining at a higher level than what we experienced in the last few decades,” Leung says.
“In an environment characterized by increased fiscal spending and rapid technology adoption, an active approach to portfolio and risk management is also essential to help navigate complex and fast-evolving market conditions.”
According to JPMAM, the LTCMAs resulted from a rigorous research process that combined quantitative and qualitative inputs from over 100 industry-leading portfolio managers, research analysts, and strategists worldwide.
