Key Updates in This Quarter's Forecasts
Our long-term outlook for fixed income assets is mixed, with sovereigns somewhat higher and credits somewhat lower as a rally in risk assets drove credit spreads lower:
- US Aggregate Bonds: Unchanged at 4.5%.
- US Long Treasury Bonds: Revised to 5.0% from 4.7% last quarter.
- US High Yield Bonds: Revised to 4.4% from 4.9% last quarter.
Our 10-year forecasts for equity markets declined across regions as an 11.7% gain in global equities last quarter weighed on valuations:
- US Large-Cap Equities: Revised to 5.8% from 6.2% last quarter.
- International Equities ex-US: Revised to 7.3% from 7.9% last quarter.
- Emerging Markets Equities: Revised to 8.4% from 9.0% last quarter.
This quarter’s portfolio rebalancing recommendations include:
- Increase in US Aggregate Bond allocations.
- Reduction in US High Yield allocations.
- Increase in US REITs exposure.