Sad earnings prospects for balanced portfolios

D.he year is coming to an end, it is time to look ahead to 2021. But investments are actually of a longer-term nature. As a result, some asset managers are now looking ahead to the next decade. This includes the investment company JP Morgan AM, which has been publishing long-term assumptions for the next ten to 15 years on a regular basis for 25 years. These are intended to help institutional clients in particular to plan their investment strategy. But these tips are also valuable for long-term thinking private investors. There are forecasts for more than 200 asset classes in 16 currencies. The classic, balanced portfolio with 60 percent stocks and 40 percent bonds is a key parameter.

JP Morgan has bad news. Twelve years ago, the forecast for such a portfolio in euros was around 6.5 percent annually. It is now only 2.7 percent – another 0.5 percentage points less than in the previous year. The background to this is not least the significantly lower expectations of a normalization of monetary policy. According to portfolio manager Michael Feser, the further easing in the wake of the Corona crisis, the need to support the national budget and the low inflation leave little hope for higher interest rates. The forecast for the normal money market interest rate remains the same at 1 percent for the euro area, but it will probably not be achieved before 2026 – two years later than last assumed. The average expected return falls from 0.6 percent to 0.2 percent.


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