Higher starting points, healthier foundations

29th edition of J.P. Morgan Asset Management’s Long-Term Capital Market Assumptions (LTCMAs) is published as a new economic era comes into focus. Gone is the low investment, low growth and low interest rate world of the 2010s. Despite the geopolitical risks that dominate the headlines, under the surface the team sees a healthier global economy set to deliver higher growth, robust capital investment and higher rates.

Higher policy rates reinforce strong projected bond returns, and higher growth supports corporate earnings and projected equity returns (only modestly lower despite challenging starting valuations). The long-term return forecast of 6.4% for a USD global 60/40 stock-bond portfolio dips 60 basis points (bps) from last year.

Alternatives are now emerging from a period of asset repricing and offer compelling returns and diversification options.

The 2025 LTCMAs explore several themes that the team thinks will shape markets over the forecast horizon:

• Fiscal activism: Austerity is off the agenda as governments have shifted toward fiscal activism. But it matters how public funds are spent. To boost real growth and not merely fuel inflation will require investments that stimulate supply rather than purely stoke demand.
• Economic nationalism: The pandemic highlighted the fragilities in supply chains and infrastructure, spurring economic nationalism (and keeping our estimate of inflation volatility elevated). The team notes that there is a fine line between pragmatic economic nationalism and overt protectionism.
• Artificial intelligence (AI): Adoption of artificial intelligence has only just begun, but it will likely affect all parts of the economy. The team now projects a 20 basis point annual boost to developed economies’ growth from AI – potentially a conservative estimate.

Portfolios for a new economic era will need to manage a range of risks. But overall, the 2025 LTCMAs offer an optimistic outlook. As investment levels pick up and rates normalize, the team thinks a healthy – even buoyant – economy will emerge, providing a strong foundation for asset markets.

JPMorgan Asset Management (UK) Limited is an offshore strategic partner to STANLIB Asset Management (Pty) Ltd and is authorised and regulated by the UK’s Financial Conduct Authority.