By Davide Barbuscia
NEW YORK, March 3 (Reuters) - U.S. firm Capital Group,
one of the world's largest investment management companies which
manages about $2.2 trillion in equity and fixed income assets,
said the beating that markets took last year made it more
bullish on long-term stock and bond returns.
"After a tumultuous year that saw double-digit declines in
most equity and fixed income asset classes, our 20-year return
assumptions are higher across the board," a committee of
analysts and portfolio managers said in a report.
They expect U.S. stocks to give an annualised return of 7.2%
over the next 20 years, up from their 5.8% forecast at the end
of 2021. Return expectations for U.S. government bonds with
maturities of five to 10 years more than doubled to 3.4% from
1.6% in 2021.
Financial markets took a beating last year as global central
banks tightened monetary policy aggressively to fight inflation,
hiking interest rates and feeding worries of a possible global
recession.
The U.S. Federal Reserve is expected to maintain its 2%
inflation target, but the path of inflation will likely remain
turbulent, said Capital Group.
"We do expect the Fed to be successful over time in getting
inflation under control," Maddi Dessner, Head of Global Asset
Class Services at Capital Group, told Reuters in an interview.
"As the Fed is removing accommodation, and they may need to
do that even more quickly than we expect, we think that there
will be additional volatility around that inflation number," she
said.
The U.S. dollar is expected to depreciate over the long
term, boosting returns from emerging markets stocks to 9% - the
highest expected return among asset classes, up from a previous
6% long-term forecast.
Emerging markets are seen as giving the most attractive
returns on the debt side too, at 7.6%, with local currency debt
returns offsetting potential defaults in U.S. dollar debt.
Improved returns for emerging markets assets outpaced lower
growth expectations for China, where estimates for real economic
growth for the next 20 years were lowered to 3% from 4%.
The report cited several factors for that forecast including
"concerns about the stability of policies affecting
private-sector investment, and a slow property market."
(Reporting by Davide Barbuscia; Editing by David Gregorio)
Messaging: davide.barbuscia.reuters.com@reuters.net))
Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.