J.P. Morgan just released its 2024 Long-Term Capital Market Assumptions (LTCMAs), revealing opportunities to develop upon the 60/40 portfolio as the economy transitions. The LTCMAs offer a 10-15-year forecast for risk and return across various asset classes. The report is in its 28th edition, and the research is vital for investors constructing more innovative portfolios amid a shift from disinflation to reflation and higher capital costs.
J.P. Morgan Released Its 2024 Long-Term Market Assumptions
Considering the evolving macroeconomic environment, the outlook projects a 7.0% annual return for a standard 60/40 stock-bond portfolio. Introducing a 25% allocation in alternative assets could enhance this forecast by 60 basis points and improve the Sharpe ratio by around 12%.
Factors like automation and AI’s impact on productivity, energy transition, and new technologies are driving slight growth increases and presenting new investment avenues.
Sylvia Sheng, Global Multi-Asset Strategist at J.P. Morgan Asset Management, emphasises the importance of diversification and international exposure in portfolios, especially considering the divergence between China and other emerging markets (EMs).
While non-China EM equities show promising fundamentals, Chinese equities are attractive based on valuations and anticipated gradual RMB appreciation. Managing and diversifying EM investments is crucial for capitalising on opportunities and mitigating risks.
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Kerry Craig, Global Market Strategist at J.P. Morgan Asset Management, notes that while EMs maintain a growth premium over developed markets (DMs), this gap is narrowing. DM growth forecasts have increased to 1.6% due to AI-driven productivity gains, while EM forecasts have dropped to 3.5%, partly due to China’s slowing expansion.
Andrew Creber, Australia and New Zealand CEO at J.P. Morgan Asset Management, highlights the LTCMAs’ role in long-term risk-reward assessment, emphasising diversification across asset classes and regions in unpredictable markets.
The LTCMAs serve as a guide through various scenarios, aiding in identifying and reviewing investment opportunities aligned with clients’ long-term objectives.
This year’s LTCMAs include thematic articles on the state’s role in the economy and expanding portfolio diversification tools. These projections, developed through extensive research and expert insights, aid in building robust portfolios, guiding asset allocations, and setting realistic expectations for risk and returns over a decade or more.
