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.