Market Views

2025 Q3 Capital Market Assumptions

By Marco Aiolfi, John Hall & Lorne Johnson

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.
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This information is not intended as a recommendation to invest in any particular asset class or strategy. Forecasts may not be achieved, subject to change and are not a guarantee or reliable indicator of future results. Source: PGIM Quantitative Solutions as of Jun 30, 2025.
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This information is not intended as a recommendation to invest in any particular asset class or strategy. Forecasts may not be achieved, subject to change and are not a guarantee or reliable indicator of future results. Source: PGIM Quantitative Solutions as of Jun 30, 2025.
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Marco Aiolfi

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John Hall

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Lorne Johnson