Press release
Northern Trust’s 5-Year Market Forecast Calls for 2.6% Global Growth
Rates and Inflation to Remain Low; Stock Returns in the 3.8-8.2% Range; High Yield and EM Debt Outliers amid Low Bond Returns CHICAGO & LONDON--(BUSINESS
About this update from Northern Trust Corporation
[{"type":"text","content":"\nRates and Inflation to Remain Low;\nStock Returns in the 3.8-8.2% Range;\nHigh Yield and EM Debt Outliers amid Low Bond Returns \n\n CHICAGO & LONDON--(BUSINESS WIRE)--\nThe global economy will experience 2.6% real average annualized growth over the next five years, along with a continuation of controlled inflation and accommodative monetary policy, according to Northern Trust’s Capital Market Assumptions Five-Year Outlook. The firm predicts that interest rates will remain low, with the U.S. Federal Reserve not raising its federal funds rate for at least five years. And, despite several emerging forces trying to raise inflation, it expects it to remain below central bank targets as these forces are offset by the impact of technology and automation, weak consumer demand, and a slow employment recovery.\n\n\nThe Capital Markets Assumptions report, featuring five-year average annualized return expectations and forecasts for a wide range of asset classes, is produced annually. Rooted in the firm’s deep capital market analysis, it informs the investment decisions and asset allocation recommendations made by Northern Trust, which as of 30 June 2020, had US$1.3 trillion in assets under management.\n\n\nOn a global basis, the report foresees average annualized equity returns in the mid-single digits except for emerging markets in Latin America – 8.2% – and in Europe, the Middle East, and Africa (EMEA) – 7.1%. The next highest equities forecasts are for Australia at 5.8%, the U.K. at 5.6%, and Europe, excluding the U.K., at 5.4%. The lowest forecasts are for Japan at 3.8% and the U.S. at 4.7%. The forecast for overall emerging markets is 5.4%.\n\n\nIn fixed income, except for a 5.6% return expectation for global high yield, including 5.5% for the U.S. and 5.2% for Canada, the report is calling for returns mainly in the 1% – 3% range. Emerging market debt is an exception at 4.5%. The highest cash return expectation is a paltry 0.2% for Australia and Canada, followed by the U.S. and the U.K. at 0.1%. Negative cash returns are expected for Japan (-0.1%) and Europe (-0.5%).\n\n\nExcept for the 8.2% return expected for Latin American emerging market equities, the highest return forecast is for private equity at 7.9%. In contrast, the forecast for hedge funds, the other main alternative investments asset class, is much lower at 2.6%.\n\n\nTh...