Press release
Northern Trust Forecasts Slow Economic Growth and Moderating Inflation Over the Next 10 Years
Global Economy Anticipated to See Real Annualized Growth of 2.4%, with Developed-Market Inflation at 2.4% CHICAGO & LONDON--(BUSINESS WIRE)-- Northern
About this update from Northern Trust Corporation
[{"type":"text","content":"\nGlobal Economy Anticipated to See Real Annualized Growth of 2.4%, with Developed-Market Inflation at 2.4%\n\n\n CHICAGO & LONDON--(BUSINESS WIRE)--\nNorthern Trust’s Capital Market Assumptions (CMA) Report, an annual report of long-term average annualized return expectations for a wide range of asset classes, forecasts below-trend global growth at an annualized rate of 2.4% over the next 10 years, moderating developed-market inflation of 2.4%, and a lower global equity return of 6.3% a year on average.\n\n\nRooted in the firm’s deep capital market analysis, the CMA Report informs the investment decisions and asset allocation recommendations made by Northern Trust, which as of June 30, 2023, had US$1.4 trillion in assets under management. Forecasts are created with a “forward-looking, historically aware” approach, analyzing the past drivers of returns across asset classes and developing investment themes that inform how those return drivers may evolve in the future.\n\n\nFor fixed income, Northern Trust expects higher yields to improve returns while defaults remain near the long-term average. The report forecasts global high yield bonds to return 7.2% annualized over the next 10 years, compared to 3.5% during the last 10 years. The global investment grade bond return forecast is 3.7% annualized, up from 2.1% in the past decade.\n\n\nFor equities, elevated inflation will likely support solid sales growth but may also cause falling profit margins from higher input and financing costs, muddying the outlook. Northern Trust expects global equities to return 6.3% annualized over the next decade, down from 10.4% in the previous decade. In developed markets, the report forecasts the highest annualized returns from Australia (7.2%) and Canada (6.9%) and the lowest returns from Japan and Europe, both at 6%. The forecast for emerging markets is 5.9% annualized, down from 6.1% in the past 10 years as China’s economy struggles.\n\n\n“While we expect the strong market momentum to continue in the short-term, we see headwinds on the horizon,” said Northern Trust Asset Management Global Chief Investment Officer Angelo Manioudakis. “Over the next 10 years, we think certain factors – including increased geopolitical risk, elevated debt levels with higher financing costs and demographic shifts in most of the developed world – will constrain long-t...