The projected annual return for a U.S. dollar-denominated 60/40 stock and bond portfolio over the next 10–15 years rises to 7.0%, although higher correlations between stocks and bonds call for additional diversification. This is the main takeaway from the 31st edition of the 2027 Long-Term Capital Market Assumptions (LTCMA) report by J.P. Morgan Asset Management. The study offers a comprehensive 10- to 15-year outlook on the future returns and risks across various investment asset classes, against a backdrop where inflation uncertainty and market volatility remain elevated.
While labor and demographic headwinds may constrain long-term growth potential, the report argues that increased capital expenditure and the adoption of artificial intelligence across sectors will bolster near-term earnings and lift long-term productivity.
The report emphasizes the potential of regional equity diversification and the inclusion of alternative assets, particularly hedge funds and real assets. A 60/40+ portfolio with a 30% allocation to diversified alternatives could boost expected returns up to 7.5% and improve the Sharpe ratio by 21% compared to a conventional 60/40 portfolio.
“Our long-term capital market assumptions help investors navigate markets reshaped by economic nationalism, technological acceleration, and shifting capital flows. This year’s outlook points to stronger long-term growth and new opportunities to build more resilient portfolios through diversification—combining higher global fixed-income yields with alternative and real assets that deliver differentiated return sources and enhanced inflation protection,” noted John Bilton, Global Head of Multi-Asset Strategy at J.P. Morgan Asset Management.
For his part, David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, commented: “The global economy is entering a dynamic investment cycle in which AI adoption and productivity gains reinforce growth prospects. At the same time, demographic challenges, elevated public deficits, and a more complex geopolitical landscape suggest that inflation will remain more volatile across our forecast horizon.”
Regarding the report’s practical utility, Grace Peters, Global Co-Head of Investment Strategy at J.P. Morgan Private Bank, explained: “Each year, the assumptions from our LTCMA report provide the foundation for building client portfolios, and that has never been more critical than it is today. Returns matter, but they are no longer the only factor to consider. In the current environment, achieving an optimal balance between risk and return is essential. High market dispersion creates opportunities for investors who take a disciplined approach to strategic asset allocation, looking beyond what the headlines might suggest.”
Key Takeaways from the Report
The firm explains that three core forces are shaping the future and will drive returns. The first is economic nationalism, which spurs state investment, though risks linked to inflation volatility persist. Second, technology adoption is underpinning the global economy by driving investment and productivity. Meanwhile, a surge in domestic investment is prompting a reallocation of capital and altering the dynamics of public and private flows.
The best growth prospects for the developed world in 15 years: The report notes that a global investment boom focused on artificial intelligence, set to extend through 2040, will lift total factor productivity by 50% to 120 basis points. This boost raises the forecast for U.S. real GDP growth to 2.1% and developed-market nominal growth to 4.2%. In addition, the policy mix of GDP and inflation is the most favorable seen since the pandemic.
Furthermore, upward revisions to U.S. equities, a global bond revival, and a maiden analysis of bitcoin take center stage. According to the study, profit margins exceeding 15% lift the forecast for U.S. large-cap equities by 80 basis points to 7.5%, leading developed market equity expectations to surpass emerging markets for the first time in the report’s history. Meanwhile, rising real yields push global aggregate bond forecasts up from a low of 2.1% in 2021 to 5.3% today—the highest level in two decades. The document also includes an expected return range for bitcoin, although the asset is not included as a portfolio allocation.
Regarding alternative assets, they offer superior returns, enhanced diversification, and strengthened inflation protection. Higher inflation volatility, persistent currency debasement risks, and expanding alpha-generation opportunities reinforce the role of alternative assets as an indispensable portfolio component and return engine. The analysis lifts the outlook for diversified hedge funds by 140 basis points, supported by sustained alpha resilience and a higher interest-rate regime. Concurrently, it maintains a constructive outlook on real assets given their capacity to hedge against heightened inflation volatility.
Return Assumptions by Asset Class
Fixed Income
Intermediate-term U.S. Treasuries are expected to deliver a 4.6% return, supported by expectations of higher policy rates and the reconstitution of term premia, which brightens long-term return prospects.
U.S. investment-grade corporate debt is projected to return 6.1%, while U.S. high-yield debt is forecast at 6.7%, with a fair value spread of 440 basis points, driven by improved credit quality among the index’s constituents.
Equities
U.S. large-cap equities are expected to yield 7.5% (up from 6.7% previously), reflecting persistent technology adoption and productivity gains. Nevertheless, elevated starting valuations and concentration risk remain vital considerations. Globally, equities are projected to return 7.5% (in USD), with non-U.S. markets offering richer diversification potential and benefiting from a U.S. dollar depreciation that proceeds at a more measured pace.
For emerging markets, the report projects equity returns of 7.1% (in USD)—a lower figure than the previous year, as AI tailwinds and capital expenditures (capex) normalize.
Alternative Investments
Alternatives encompass several distinct categories:
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Private Equity: Projected return stands at 9.8%, marking a slight moderation. Return potential remains anchored to consistent value creation and operational efficiencies, including AI integration across portfolio companies.
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Real Estate: Core U.S. real estate is projected to return 8.1%, while European core real estate is set at 7.1%.
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Core Global Infrastructure: Forecast to deliver 7.1% (up from 6.5% last year), mirroring supply chain reconfigurations.
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Commodities: Broad-basket commodities return forecasts rise to 4.8%, as access to critical minerals remains constrained and geopolitical risks weigh on the outlook. Gold holds steady at 5.5%.
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Timberland: Global timberland assets are expected to generate 6.2%, slightly below the 6.3% recorded the previous year.
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Hedge Funds: Diversified hedge funds are projected to return 6.7%, up from 5.3% last year, reflecting higher alpha estimates.
The Long-Term Capital Market Assumptions (LTCMA) report is the product of an exhaustive research process combining quantitative and qualitative inputs from more than 90 leading portfolio managers, economists, and research analysts globally. These time-tested projections cover over 200 assets denominated in more than 20 currencies, serving as a benchmark for strategic asset allocation and long-term investment planning across today’s evolving financial landscape.