2023 Long-Term Capital Market Assumptions

JPMorgan's 2023 Long-Term Capital Market Assumptions predict that financial markets are offering their best potential long-term returns since 2010 thanks to lower valuations and higher yields. Despite the current global inflation rate of 7.30%, JPMorgan expects it to subside over the next two years and raises its long-term global inflation forecast by only 20 basis points to 2.60%. Bond returns are likely to move back into positive territory, making them a plausible source of income, while most sovereign bonds' real return forecasts are in positive territory. Projected equity returns could rise sharply. Although margins may recede from today's levels, valuations provide an attractive entry point. Alternatives, meanwhile, deliver appealing diversification benefits. Many of the trends affecting the outlook will demand higher capital expenditure, just as the previous decade's abundance of cheap capital is reversing, leading to more idiosyncratic returns and lower correlations. Nevertheless, the 60/40 mix can form the bedrock of portfolios again, with alternatives offering alpha, inflation protection, and diversification. Once the market turbulence clears, investors will have more opportunities to achieve their long-term portfolio return goals.