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:
Asset class return expectations:
| Asset Class | 20-year expected returns (%) 2025 estimates | 20-year expected returns (%) 2024 estimates |
|---|---|---|
| Equities | ||
| U.S. equity | 6.3 | 6.9 |
| Non-U.S. developed market 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.
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This analysis represents the views of a small group of investment professionals based on their individual research and are approved by the Capital Market Assumptions Oversight Committee. They should not be interpreted as the view of Capital Group as a whole. As Capital Group employs The Capital System, the views of other individual analysts and portfolio managers may differ from those presented here. They are provided for informational purposes only and are not intended to provide any assurance or promise of actual returns. They reflect long-term projections of asset class returns and are based on the respective benchmark indices, or other proxies, and therefore do not include any outperformance gain or loss that may result from active portfolio management. Note that the actual results will be affected by any adjustments to the mix of asset classes. All market forecasts are subject to a wide margin of error.
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