J.P. Morgan Releases 2021 Long-Term Capital Market Assumptions, Encouraging Investors to Adopt a New Portfolio for a New Decade

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NEW YORK, Nov. 10, 2020 /PRNewswire/ — J.P. Morgan Asset Management today released its 2021 Long-Term Capital Market Assumptions (LTCMAs), this year exploring how the alignment of fiscal and monetary policy adopted to tackle the COVID-19 crisis will impact the economy and markets over the next cycle. In the 25th edition of the research, long-term growth and inflation projections remain little changed, but public asset market return expectations fall sharply, prompting investors to look elsewhere for higher returns.

“As the global economy begins to move towards a new business cycle precipitated by the pandemic in 2020, we anticipate the broad deployment of monetary and fiscal stimulus to have a lasting imprint on economies globally,” said John Bilton, Head of Global Multi-Asset Strategy, J.P. Morgan Asset Management. “To navigate the new decade, investors may consider diversifying from traditional safe assets that no longer offer income, and toward alternative assets that more fully exploit the specific tradeoffs that a portfolio can tolerate to potentially find higher returns.”

“In 2020 we witnessed the steepest recession since the Great Depression. In its aftermath, we are embarking on a new business cycle characterized by synchronized monetary and fiscal policy,” said Dr. David Kelly, Chief Global Strategist, J.P. Morgan Asset Management. “The depressed starting points caused by the COVID-19 recession cause us to add a small cyclical bonus to most GDP growth projections, and despite edging downwards, our emerging market growth outlook continues to outpace developed markets as emerging market (EM) productivity and human capital gradually converge to developed market (DM) levels.”


Global Growth: Real growth projections are modestly higher this year, with our forecast for global growth up 10 basis points (bps), at 2.4%, over the next 10 to 15 years. This is driven by the 0.1% uplift in our developed market forecast, to 1.6%, which reflects the cyclical growth bonus we attribute to economies as they accelerate out of recession and close their output gaps. Our emerging market forecast is unchanged, at 3.9%, with the slight dip we see trend growth offset by a cyclical bonus.

Global Inflation: Like our growth forecasts, our inflation forecasts are little changed and our outlook for aggregate global inflation remains intact at 2.2%. Most of our developed market inflation forecasts are unchanged, and our emerging markets forecast also moves sideways, at 3.3%, despite small downward revisions for several countries.

Policy: In the decade ahead, we expect more active fiscal stimulus than in any other peacetime era in modern financial history. Fiscal and monetary policy should pull in the same direction to achieve economic objectives – a marked change from the last few decades when dovish central bank policy was frequently offset by fiscal contraction or government austerity programs. Higher fiscal spending is inevitable in the next cycle; it is a shift we cautiously welcome, while acknowledging that poorly executed fiscal expansion can have devastating second order effects.

Debt Levels: A period of elevated leverage will likely persist for some time to come. Central banks have little choice but to focus less on holding inflation in check and more on deploying and maintaining financial stability. This is a significant step change, and central banks’ incentives may increasingly align more with issuers of debt than with the holders of debt.


Equities: The impact of elevated valuations is most stark for U.S. large cap equities, where our return forecast falls by 1.5%, to 4.1%. This pulls global equity returns down by 1.2%, to 4.8%, while our global equity ex-U.S. forecast is down 0.7%, at 5.8%, implying better forecasts for returns for some non-U.S. markets.

Fixed Income: Given extremely low starting yields, we expect most government bonds will deliver negative real returns over the next 10 to 15 years. Our estimates of equilibrium yields are unchanged for cash and 30-year bonds in most currencies, but they are modestly lower at the 10-year point to allow for higher structural demand in the belly of the curve as central bank balance sheets grow. With global central banks committed to low rates for an extended period, we have pushed out any expectation for rate normalization to at least 2024. But once rates do start to increase, we think they will rise swiftly, particularly if fiscal stimulus has led to some reflation.


  • In real assets, returns have held up remarkably well. Our forecasts for core real estate rise by 0.1% in the U.S. and in Asia-Pacific, to 5.9% and 6.6%, respectively, while European-ex UK core real estate is unchanged at 5.0%.
  • Infrastructure and transportation offer standout returns to investors, with global core infrastructure equity returns up 0.1%, to 6.1%, and global core transportation – a newly added asset this year – at 7.6%.
  • Cap-weighted private equity forecasts decline 1.1%, to 7.7%, driven by higher valuations and competition among prospective buyers, combined with a slowdown in fundraising and increased disruption. Offsetting this is a slight upgrade in alpha expectations, based on the ability to deploy dry powder more productively in a dislocated economy and rotation into higher growth sectors.
  • Hedge fund strategy projections come down this year, reflecting lower returns available in public market assets. Nevertheless, we do believe that conditions for alpha generation are improving, which will heighten the importance of manager selection.

In addition to covering key findings, the 2021 research explores four important themes in depth, including:

  • Weighing the investment implications of climate change policy
  • The Fiscal Decade: The promises, problems and potential of fiscal stimulus
  • Debt, debt everywhere: The implications of a high debt world
  • Alternatives: From optional to essential

The LTCMAs are developed as part of a deep, proprietary research process that draws on quantitative and qualitative inputs as well as insights from a team of more than 30 experts across J.P. Morgan Asset Management. In its 25th year, these time-tested projections help build stronger portfolios, guide strategic asset allocations, and establish reasonable expectations for risk and returns over a 10 to 15-year timeframe for more than 200 major asset and strategy classes. These assumptions fuel decision-making in J.P. Morgan’s multi-asset investing engine and inform client conversations throughout the year.

Please view the full 2021 Long-Term Capital Market Assumptions and thematic articles here.  

About J.P. Morgan Asset Management
J.P. Morgan Asset Management, with assets under management of USD 2.3 trillion (as of 30 September 2020), 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.

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The resulting projections derived from the J.P. Morgan Asset Management (“JPMAM”) Long Term Capital Market Assumptions include only the benchmark return associated with the portfolio and does not include alpha from the underlying product strategies within each asset class. The assumptions are presented for illustrative purposes only. They must not be used, or relied upon, to make investment decisions.  The assumptions are not meant to be a representation of, nor should they be interpreted as JPMAM investment recommendations. Allocations, assumptions, and expected returns are not meant to represent JPMAM performance. Please note all information shown is based on assumptions, therefore, exclusive reliance on these assumptions is incomplete and not advised.  The individual asset class assumptions are not a promise of future performance. Note that these asset class assumptions are passive-only; they do not consider the impact of active management.  

Opinions and statements of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations. The information in this piece is not intended to provide and should not be relied on for accounting, legal, and tax advice or investment recommendations.

JPMAM Long-Term Capital Market Assumptions: Given the complex risk-reward trade-offs involved, we advise clients to rely on judgment as well as quantitative optimization approaches in setting strategic allocations. Please note that all information shown is based on qualitative analysis. Exclusive reliance on the above is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. Note that these asset class and strategy assumptions are passive only – they do not consider the impact of active management. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The outputs of the assumptions are provided for illustration/discussion purposes only and are subject to significant limitations. “Expected” or “alpha” return estimates are subject to uncertainty and error. For example, changes in the historical data from which it is estimated will result in different implications for asset class returns. Expected returns for each asset class are conditional on an economic scenario; actual returns in the event the scenario comes to pass could be higher or lower, as they have been in the past, so an investor should not expect to achieve returns similar to the outputs shown herein. References to future returns for either asset allocation strategies or asset classes are not promises of actual returns a client portfolio may achieve. Because of the inherent limitations of all models, potential investors should not rely exclusively on the model when making a decision. The model cannot account for the impact that economic, market, and other factors may have on the implementation and ongoing management of an actual investment portfolio. Unlike actual portfolio outcomes, the model outcomes do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact the future returns. The model assumptions are passive only – they do not consider the impact of active management. A manager’s ability to achieve similar outcomes is subject to risk factors over which the manager may have no or limited control. The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield are not a reliable indicator of current and future results.

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