Capital Market Assumptions 2023

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Paul Zemsky

Paul Zemsky, CFA

Chief Investment Officer, Multi-Asset Strategies and Solutions

Barbara Reinhard

Barbara Reinhard, CFA

Managing Director, Head of Asset Allocation

Our long-term return expectations for capital markets serve as key inputs into our strategic asset allocation process for multi-asset portfolios and provide context for shorter-term forecasting.


Our annual capital market forecasting process is always a time for looking ahead and looking back for our investment teams. Looking ahead to define the trends and underlying forces that will determine asset class returns over the next decade and looking back to see whether our forecasting methodology and statistical techniques are still relevant and cutting edge.

In this document, we present our 10-year ahead forecasts for risk, return and correlation of returns for mainstream asset classes in the global investable universe. This year, we have modified our process to incorporate climate change, a subsegment of environmental, social and governance (ESG) factors, into our return forecasts. We specifically choose climate change as the most tangible factor within ESG-related considerations, as it can affect consumer behavior, investment needs, financing, supply chain organization, cross-border trade and stranded assets. Climate change’s effect on these variables flows directly into GDP growth and inflation, the magnitude of which will be partly driven by increases in productivity-enabling technologies. For further discussion of climate change in our capital market forecasts please see Appendix section.

Our analysis points to a decade of subdued returns for most major asset classes.

The return profile for many assets classes remains below historical averages. For example, global equities are forecast to have an arithmetic return of 6%. The economy being mired in a low productivity regime leaves equity in solid shape, but offering what most investors consider somewhat limited upside potential. By contrast, fixed income is forecast to deliver decent returns. Global fixed income assets are forecast to gain 3.6% and we expect US long government bonds to return 4.5%. The rationale behind stronger than previously forecast fixed income gains is the starting point for real yields, which are positive for the first time since 2009. The more normal investment environment that positive real yields bring to investors is a welcome development.

We hope that you find our capital market forecasts useful and look forward to the year ahead. We wish you the very best for a successful 2023.


Summary of findings

Our capital market assumptions (CMA) 2023 report details our research on asset class returns, standard deviations of returns and correlations over the 10-year horizon from 2023 through 2032. These estimates represent key inputs into strategic asset allocation decisions for our multi-asset portfolios and provide context for shorter-term macroeconomic and financial forecasting.

Compared to last year’s projections, our 2023–2032 forecast calls for similar equity returns (6.0% for the S&P 500) and higher bond returns (4.2% for the US Agg).

Our forecasts were informed by historically low potential GDP growth, reduced labor supply and elevated inflation. To avoid using a single-point estimate forecast, we incorporate an alternative scenario, which has slightly better or worse macro inputs. This year, the alternative case scenario was again based on inputs of marginally higher productivity and a lower terminal fed funds rate.

Some key results of our analysis:

  • The next decade will likely be characterized by returns below historical averages across all major asset classes.
  • Developed market equities are likely to deliver mid-single-digit returns, with returns for most non-US market assets lower than those for comparable US assets.
  • Emerging market equities should outperform developed markets, albeit with higher expected volatility given a more uncertain path to growth than that of developed markets.
  • Bond return assumptions have increased from last year but remain in the low single digits. These projections assume that moves in both bond term premiums and real interest rates will cap upside returns available to fixed income assets.

Past performance does not guarantee future results. This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, (1) general economic conditions, (2) performance of financial markets, (3) interest rate levels, (4) increasing levels of loan defaults, (5) changes in laws and regulations, and (6) changes in the policies of governments and/or regulatory authorities.