Press release
Northern Trust’s 5-Year Market Forecast Calls for Global Economy to Grow by 2.9%
Annualized Inflation to Reach 1.7% Low Interest Rates to Foster Positive but Low Returns Global Equity Return Forecast to Reach 4.6% CHICAGO &
About this update from Northern Trust Corporation
[{"type":"text","content":"\n\nAnnualized Inflation to Reach 1.7%\n\n\nLow Interest Rates to Foster Positive but Low Returns \n\n\nGlobal Equity Return Forecast to Reach 4.6%\n\n\n CHICAGO & LONDON--(BUSINESS WIRE)--\nThe global economy will experience annualized real growth of 2.9% over the next five years, along with annualized inflation of 1.7% in developed markets, according to Northern Trust’s Capital Market Assumptions Report, which is a five-year outlook. The firm predicts the persistently low interest rates will foster positive but low returns, with technology remaining a potent force that will mute inflation. In the meantime, more central banks are expected to broaden their objectives to include fighting income inequality and climate change, leading them to continue to provide monetary stimulus.\n\nThe annual Capital Market Assumptions report features five-year average annualized return expectations and forecasts for a wide range of asset classes. 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 June 30, 2021, had US$1.5 trillion in assets under management.\n\n“In our view, investors can expect continued global economic growth, but at a pace that reverts to its longer term mean – what we call a ‘reversion to mediocrity’,” said Jim McDonald, Northern Trust’s chief investment strategist. “And, for the sixth consecutive year, we don’t see inflation making any drastic moves: we’re calling for ‘stuckflation’ to continue, with inflation coming in at an annualized 1.7%, below the 2% targeted by most central banks.”\n\nEquity market returns in the past five years have outpaced even the most optimistic forecasts. While valuations forecasted 5% annual equity market returns, they in reality achieved 15%. But, based on historical trends, Northern Trust expects a return to subdued but positive returns in the next five years, lowering its forecast for five-year annualized global equity returns slightly to 4.6%. This 0.3 percentage-point reduction from last year’s report is driven by the U.S. forecast return of 4.3% – at the low end of developed market regions. The report expects mid-single-digit annualized returns.\n\nFor developed markets, the Capital Market Assumptions report forecasts the highest equity returns for the UK, set at 6.2%, as it finds ...