PQS 2024 Q3 Capital Market Assumptions
Sep 13, 2024
The U.S. Federal Reserve (Fed) has acknowledged modest progress toward bringing inflation back to target but remained in wait-and-see mode. Read on to hear the multi-asset team’s forecast for the quarter ahead.
The U.S. Federal Reserve (Fed) has acknowledged modest progress toward bringing inflation back to target but remained in wait-and-see mode. While the Fed left policy rates unchanged throughout the summer, the Summary of Economic Projections (SEP) suggested the Fed will cut rates only once in 2024, compared to expectations of three rate cuts earlier this year. Meanwhile, falling inflation has provided room for a number of other developed market central banks to cut rates in response to weak economic activity.
For Q3 2024 the Multi-Asset team’s annualised nominal 10-year return forecast for Global Equities is 6.9%, a decrease from the forecast of 7.0% for the second quarter of 2024. The small forecast decrease is primarily attributable to less favorable valuations following a 3.0% advance in Global Equities in the second quarter of 2024. Global sovereign interest rates moved modestly higher in the second quarter as expectations for global central bank rate cuts were pushed further out into 2024 amid a still-growing global economy and inflation that generally remained above central bank targets. The long-run forecast for hedged Global Aggregate Bonds is 4.5%, an increase of 0.5% from last quarter’s forecast. The team’s forecast return for a balanced portfolio of 60% Global Equities unhedged and 40% Global Aggregate Bonds hedged is 6.3% annually over the next 10 years, an increase of 0.1% from the forecast for the second quarter of 2024.
Note: All forecasts may not be achieved and are not a guarantee or reliable indicator of future results.
References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.
The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.
Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.
For compliance use only 3872614
