Firm lowers 20-year estimates for equities and bonds from last year
Overall outlook is still positive for long-term investors across global markets
LOS ANGELES, Feb. 13, 2025 -- Capital Group, one of the world's largest and most experienced active investment managers, issued its 2025 capital market assumptions (CMAs), which represent the company's long-term expectations for returns, as well as correlations and volatilities of major asset classes over a 20-year time horizon. Capital Group's CMAs serve as the foundational inputs for the quantitative models that inform the firm's solutions offerings.
"The outsized returns on U.S. equities over the past two years, increasing markets concentration and high stock valuations are factors we need to consider as we think about long-term portfolio construction," said Maddi Dessner, head of asset class services at Capital Group. "While we've lowered our return expectations for global equities, we expect to continue to see bright pockets of opportunity driven by structural and cyclical factors. We expect fixed income returns to exceed what was realized over the last 20 years."
"Despite the geopolitical landscape having shifted quite significantly, with elections held last year in 64 countries and the European Union, overall prospects for economic growth around the world remain healthy," said Alexandra Haggard, head of asset class services for Europe and Asia at Capital Group. "An uptick in capital expenditure, especially in developed markets, the deepening of capital markets, the productivity enhancements from artificial intelligence and a broader adoption of digitization across the world are expected to support growth in both developed and emerging markets."
Capital Group's 2025 capital market assumptions note:
- Central banks have made good progress at mitigating and reversing inflationary trends. Economic growth and inflation across developed and emerging markets remain largely intact.
- Higher interest rates are expected to persist across major markets amid relatively robust economic growth.
- The U.S. dollar is forecast to depreciate against a broad basket of currencies, but the pace of that depreciation has been marked down compared to last year due to wider differentials on productivity between the U.S. and other countries.
Asset class return expectations:
Asset class | 20-year expected | 20-year expected |
Equities | ||
U.S. equity | 6.3 | 6.9 |
Non-U.S. developed markets equity | 6.0 | 6.7 |
Emerging markets equity | 6.8 | 7.6 |
Europe ex-U.K. | 5.7 | 5.8 |
Japan | 7.0 | 7.8 |
All country world equity | 6.3 | 6.9 |
Fixed income | ||
U.S. Treasury intermediate term | 4.0 | 4.0 |
U.S. TIPS | 4.1 | 4.2 |
U.S. aggregate | 4.6 | 4.7 |
U.S. high yield | 6.2 | 6.5 |
Emerging markets debt (USD) | 7.0 | 7.1 |
U.S. corporate | 5.3 | 5.5 |
Cash (USD) | 3.4 | 3.3 |
Capital Group's 2025 capital market assumptions are available here.
About Capital Group
Capital Group, home of American Funds, has been singularly focused on delivering superior results for long-term investors using high-conviction portfolios, rigorous research, and individual accountability since 1931.
As of December 31, 2024, Capital Group manages more than $2.8 trillion in equity and fixed income assets for millions of individuals and institutional investors around the world. Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.
For more information, visit capitalgroup.com.
This News is brought to you by Qube Mark, your trusted source for the latest updates and insights in marketing technology. Stay tuned for more groundbreaking innovations in the world of technology.
