Long-term strategic outlook

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[ "Market Outlook" ]
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A five-year returns forecast for major asset classes — updated twice a year to help you set strategic portfolio allocations.

Key Takeaways
  • Since the last update at the start of the year, our expectations for global growth and inflation
    have been refreshed.


  • Given the changes in market prices, we now see most equity market valuations near fair value,
    except for U.S. small-cap equities which are screening cheap compared with long-term averages.


  • Expected returns for cash saw one of the largest jumps in forecasted returns since our January update
    due to rising short-term yields (note that yield accounts for the majority of the mid/long-term
    returns in fixed-income markets).


  • We expect most central banks to be at or nearing the end of their hiking cycles, signaling a peak
    in rates and a possible ceiling in total returns investors can expect from duration-based assets. 

Forecasted five-year total average returns (%)*

Source: Columbia Threadneedle Investments as of 06/15/23. Past performance does not guarantee future results. 

Strategic outlook: We started the year with equal probabilities for a recession or a soft landing, and a small chance (20% probability) given to beating consensus growth estimates. For this update, we’ve streamlined our forecast approach to use a baseline scenario that incorporates our most probable growth and inflation expectations.

  • We’ve slightly upgraded our view for the path of real GDP growth but have also slightly reduced our expectations for inflation, resulting in a nearly unchanged view of U.S. nominal growth for the next five years.


  • We are expecting U.S. and developed market economies to rebound in the next 1–2 years and return approximately to a long-term 2% annual growth rate.


  • We see inflation subsiding globally, with the U.S. leading the drop in the next 1–2 years, developed markets expected to follow next and emerging markets seeing the slowest decline.