Key takeaways for the next 10 years

OpinioPro Selection
By May 4, 2022 16:03

Key takeaways for the next 10 years

2022 long-term expected returns for capital markets

  • Balanced return: We forecast a traditional balanced fund (60% equities / 40% bonds with a home bias) to return somewhere close to 4%, or roughly 2.0% in real terms. The lower-than-historical return can be explained by the higher starting point in valuation for some markets, as well as high profit margins with rising cost headwinds.
  • Fixed income returns: Canadian bonds are more attractive than the prior two years, helped by the rise in yields, while Canadian corporate bonds offer an additional risk premium, giving an expected return of 3.4%. Emerging market bond yields rose substantially in 2021 and are now offering attractive expected returns in local currency terms.
  • Equity returns: the high starting valuation and historically high profit margins in some developed markets offer headwinds for forward-looking returns. Some of these headwinds may be partially offset by low equilibrium interest rates. Single-digit returns are similar to prior years, with better returns in the Canadian and, particularly, emerging markets, following a disappointing recent decade.
  • Currency impact:

 

OpinioPro Selection
By May 4, 2022 16:03

SEARCH