Economic Views

Seven-year asset class forecast returns: 2017 update

Our overall growth forecast for the next seven years shows a recovery in the world economy, although one that is sub-par by past standards.

08/07/2017

Introduction

Our seven-year returns forecast largely builds on the same methodology that has been applied in previous years, as explained in the appendix to this document; and has been updated in line with current market conditions and changes to the forecasts provided by the Global Economics team. This document compares our current return forecasts to those last published in July 2016. One key change this year has been a change to our methodology for forecasting credit returns, to incorporate the effects of quantitative easing (QE). A full description can be found in the appendix.

Summary

Table 1 below shows our forecast returns for the 2017–24 period. Cash and bond returns are largely expected to be negative in real terms, unsurprising perhaps given the continued low rate environment. Investors seeking positive real returns would be advised to look at riskier assets: credit, equities and alternatives. However, even here it seems positive returns are not assured. European credit and equities, for example, are both expected to yield negative real returns over the forecast horizon.

Table 1: Seven-year asset class forecasts (2017–2024), % per annum

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The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.