Return expectations for the next 10 years are shifting as enduring structural forces reshape markets, demanding that investors reevaluate strategic portfolio allocations.
Today’s investing landscape continues to reflect a macroeconomic regime very different from the one investors grew accustomed to post the global financial crisis. The shifts set in motion by pandemic-era imbalances, geopolitics, supply chain realignment, and a major pivot in monetary policy have proven enduring rather than cyclical.
The past year brought more clarity, but it also reaffirmed a central reality: the “old normal” of near zero interest rates, muted inflation volatility and persistently low yields is simply not returning in the foreseeable future. Instead, we are operating in a world of higher-trend inflation, more frequent macro swings, and a more balanced distribution of returns across asset classes, compared with the long expansion post the global financial crisis.
Our capital market assumptions lay out the outlook for return expectations across markets for the next decade. What has changed since last year is the composition, not the direction, of the regime shift. Growth now rests on a firmer foundation, supported by gradually improving productivity, especially in technology-intensive sectors, and sustained investment in infrastructure and energy systems.
Inflation has come down meaningfully from its highs but continues to exhibit the stickiness we previously anticipated, driven by structural forces such as labour scarcity, years of commodity underinvestment, and the shift toward deglobalisation.
Equally important, the forces behind our long-term assumptions, normalising interest rates in recent years, elevated geopolitical uncertainty, physical resource constraints and the fading of the disinflationary tailwinds of the 1990–2019 era – remain firmly in place. Real yields remain meaningfully positive, inflation risks remain asymmetric to the upside, and we expect rotation of market leadership in coming years.
Investors have demonstrated a tendency to chase past winners. We call this behaviour the inflation FOMO trap – the fear of missing out, which leads investors to chase what has worked in the most recent cycle. However, the reality of market cycles suggests caution.
Indeed, market leadership changes during different regimes. In the early 2000s, real assets and bonds were clear winners. Over the last 15 years, equities and private assets dominated market leadership.
As a result of the robust performance of US equities, valuations are now at near historical extremes. Yet the underlying reality is more nuanced: While technology-led growth is real, the cost of capital has structurally risen, input prices remain firm, and margins are now more likely to compress than expand.
This is why the case for rotation away from narrow US equity leadership and toward more attractively valued, more diversifying assets is stronger today than at any time since the early 2000s. Real assets in particular stand out. Their combination of appealing valuations, strong inflation linkage, healthy fundamentals in supply-constrained segments, and positive correlation with the themes of the new regime positions them for a larger role in long-term portfolios.
Infrastructure and natural resource equities benefit from multi-year investment cycles and supply discipline; commodities have experienced years of underinvestment; and listed real estate, having reset meaningfully, offers more balanced return prospects with improved income yields.
Our outlook for the next 10 years is constructive, not complacent. Risks remain: AI-driven productivity could disappoint, or it could lead to structurally higher unemployment. Inflation could reaccelerate on renewed supply shocks. Geopolitical events may further disrupt global trade flows.
Valuations across equities or private markets may adjust faster than expected. The bond market could also reprice the long-term neutral rate higher, or credit spreads could widen abruptly after a prolonged period of tightness.
Still, the macro backdrop and market setup provide the strongest foundation for rotation in more than a decade. With forward-looking returns shaped increasingly by starting valuations, cash flows and structural sensitivities, not momentum or index concentration, the next decade is likely to diverge meaningfully from the last. Investors may not worry about missing another surge in last decade’s leaders, but we see a greater risk: missing the broadening opportunity set now emerging.
Macroeconomics
We expect the global economy to deliver moderate but stable growth over the next decade, with the US averaging 2.1% real GDP growth and global growth trending at 3.6% annually. We expect 1.8% trend productivity growth (up 60 basis points from last year’s publication), partly linked to AI diffusion and ongoing investment in digital and physical infrastructure, offset by worsening demographics (with estimated labour force growth down 40 basis points from last year to 0.3% annually) and episodic supply frictions.
Consumer inflation is expected to average 3.0% annually in the US, below recent peaks but well above the 1.6% experienced in the last cycle and significantly higher than the Federal Reserve’s long-term target. This elevated inflation reflects structural tightness in labour and materials, a more fragmented global trading system and geopolitical friction.
Fixed Income
Fixed income enters 2026 with one of its strongest starting points in more than 15 years. After a prolonged period during which yields were suppressed by central bank accommodation, the reset in monetary policy has reintroduced meaningful income into the asset class.
We expect US Treasuries to deliver mid‑single-digit annualised returns over the next decade, supported by a combination of higher real yields and more stable inflation expectations. Although yields have declined somewhat from their 2023–2024 highs, long-term fair value remains above pre‑pandemic norms, reflecting a neutral policy rate that is structurally higher than in the last cycle.
Corporate credit continues to benefit from solid balance sheets, disciplined issuance and healthy interest coverage. The primary challenge across credit markets is valuation: spreads remain near cyclical lows, suggesting limited room for capital appreciation and greater sensitivity to macro shocks.
Investment-grade credit is expected to generate steady, income‑driven returns of 4.8%, slightly less than last year’s projection. High yield offers the potential to return an average of 5.8% annually, moderately below our prior forecast due to tight spreads and a projected modest increase in default risk.
We believe preferred securities will be the top-performing fixed income category in the coming decade, given the asset class’s high yields, high quality and relatively low default rates, consistent with historical trends. Our forecasted return for preferreds remains unchanged from last year at 6.1% annually.
Equities
Equity markets have delivered strong returns for more than a decade, powered largely by US companies (and, in particular, by a narrow subset of mega‑cap technology names). However, the factors underpinning that outperformance, low interest rates, benign inflation, expanding profit margins and valuation multiple expansion, among other things, are unlikely to persist at the same scale. With interest rates structurally higher and inflation more variable, the path for earnings growth becomes more challenging.
We expect US equity returns to moderate toward their long-term averages, with headwinds emerging from compressed margins, rising labour costs and an elevated cost of capital. Our 10-year forecast of 5.8% annualised returns is unchanged from previous projections.
Valuations remain a central concern: While earnings growth may continue, starting multiples are likely to compress somewhat. Market concentration adds another layer of risk, as leadership remains heavily dependent on a small number of firms whose valuations already price in substantial future productivity gains.
Opportunities appear more balanced outside the US, where valuations are more attractive and earnings cycles less extended. Developed international markets are expected to generate average annual returns of 7.0%, in line with last year’s forecast, benefiting from lower starting multiples and sector exposures that are more closely aligned with the themes of the new regime, such as industrials, materials and financials. Emerging markets remain a selective opportunity, with the need for careful differentiation across countries and industries; our expectations for average annual growth remain unchanged at 6.3%.
Real assets
Real assets remain one of the most compelling investment opportunities in the decade ahead, supported by structural macroeconomic tailwinds, attractive valuations and strong income characteristics. In an environment defined by inflation variability, scarcity of physical inputs and elevated geopolitical risk, real assets offer diversification benefits that are difficult to replicate.
Listed real estate has reset, resulting in higher yields, improved cap rate spreads and improved assumptions about long-term growth. Low supply additions in recent years, stemming from higher rates and tighter credit conditions are now giving way to better pricing power. Our 7.8% annualised forecast is unchanged from last year.
7.8% expected 10-year annualised returns for US REITs
The infrastructure outlook has likewise improved, rising to 7.9% from 7.6% annually on average. The asset class is expected to benefit from multi‑year public and private investment cycles focused on AI and digital connectivity, transportation and energy systems. Infrastructure assets typically possess pricing power linked to inflation and long‑duration, contracted cash flows.
Natural resource equities are projected to gain 8.5% annually on average, up slightly from our year-ago projection. That forecast is shaped by a supply‑constrained environment where capital discipline, years of underinvestment, and growing demand for metals and energy inputs underpin favourable long-term fundamentals.
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