4Q22 Capital Market Assumptions4Q22CapitalMarketAssumptions

The latest edition of PGIM Quantitative Solutions’ Capital Market Assumptions (CMAs) is now available. In the 2022 Q4 CMAs the Multi-Asset team shares its quarterly update for 10-year expectations for widely-held asset classes. The team’s near-term developed and emerging market economic growth forecasts for the next 10 years have declined slightly, while inflation forecasts for the same horizon are somewhat higher than those from the previous quarter. 

In the long term, the team expects real economic growth in developed economies to continue to moderate over the next decade, with inflation anticipated to decline over the next 10 years. Long-run real economic growth and inflation in emerging markets are expected to advance at higher annualized rates. The team increased its forecasts for Global Equities to 8.5% amid more attractive valuations and higher longer-term inflation expectations. Anticipation of continued global central bank interest rate hikes led to a forecast of 5.1% for hedged Global Aggregate Bonds, up from 3.9% and 1.3% from the second and first quarters of 2022, respectively. Given these revisions, the team’s long-term forecast for a balanced portfolio (60% Global Equities unhedged/40% Global Aggregate Bonds hedged) increased to 7.6%.