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Asset Class Forecasts And Return Expectations
From the bond markets to equities, real assets and alternatives, get our asset class forecasts and return expectations to help guide your asset allocation decisions.
We find little fundamental case for interest rates to move meaningfully higher. As such, we expect rates to remain very low and – in the case of the U.S. – to fall well short of five-year market expectations.

In this low rate environment, returns can outpace starting-point yields — especially if interest rates remain low. Credit (default) risk is most noticeable in high yield, where five-year returns have historically trailed starting-point yields by 1.2% on average. We expect this difference to be lower over the next five years.
Global Investment Grade Annualized Return Forecast
Global High Yield Annualized Return Forecast
When it comes to fixed income total returns, low starting-point yields hurt but ongoing low yields help.
Northern Trust 5-Year Annualized Investment-Grade Fixed Income Return Forecast by Country (%)
Graph: Getting By With a Little Help From Low Rates
Graph: Getting By With a Little Help From Low Rates
Source: Northern Trust Asset Management, Bloomberg. Coupon return calculated as yield to worst on 6/30/2021.
Reversion to the mean will subdue returns as global economies slow and the past year’s gains leave less room for margin and valuation expansion.

For developed markets, we forecast 4.3% for the U.S. over the next five years, while the U.K. has the highest forecast at 6.2%, as it finds its post-Brexit bearings. Europe, at 4.7%, should also benefit from increased stability as well as a longer tailed post-pandemic recovery.

Our expectation of 5.3% for emerging market equity returns, driven primarily by China, should outpace developed markets overall.
Global Equities Annualized Return Forecast
Developed Market Equities Annualized Return Forecast
Emerging Market Equities Annualized Return Forecast
Retreating valuations and profit margins will temper ongoing revenue growth, leading to modest equity forecasts.
Northern Trust 5-Year Annualized Equity Return Forecast by Country (%)
Graph: Northern Trust 5-Year Annualized Equity Return Forecast by Country (%)
Graph: Northern Trust 5-Year Annualized Equity Return Forecast by Country (%)
Source: Northern Trust Asset Management.
Our 5.0% return forecast for natural resources is supported by reduced investment in commodity production in recent years, which will pressure supply for years to come and support commodity prices.

Favorable financing conditions will assist global real estate in the effort to repurpose less-needed office and retail properties into more-demanded distribution centers, healthcare facilities and residential units.

Listed infrastructure’s higher yields and historical downside protection properties make it attractive in a slow growth environment, leading to our 5.5% total return forecast for the asset class.
Natural Resources Annualized Return Forecast
Global Real Estate Annualized Return Forecast
Global Listed Infrastructure Annualized Return Forecast
A slower growth, lower interest rate environment should support higher yielding listed infrastructure.
Northern Trust 5-Year Annualized Real Assets Return Forecast (%)
Graph: Northern Trust 5-Year Annualized Returns
Graph: Northern Trust 5-Year Annualized Returns
Source: Northern Trust Asset Management, Bloomberg.
Private equity, private credit and hedge funds can enhance portfolio performance and diversification, but through a wide range of strategies with broad performance dispersion. As a result, manager selection is extremely important.

Our regression-based return forecasts for private equity (7.6%) and private credit (6.0%) represent 3.0% and 2.0% premiums to global equities and global high yield, respectively.

The combination of more alpha and subdued betas (at least per our five-year forecasts) has given hedge funds renewed interest and an increased role in the diversified portfolio for portfolios in which hedge fund investing is appropriate. A robust selection process could make the difference between an alternatives allocation that adds value to the overall portfolio and one that introduces a (high-cost) performance drag.
Private Equity Annualized Return Forecast
Private Credit Annualized Return Forecast
Hedge Fund Annualized Return Forecast
The average hedge fund strategy alpha -- returns not explained by risk exposures -- has been meaningful more recently.
Hedge Fund Return Contribution by Decade (%)
Graph: Northern Trust 5-Year Annualized Private Investments Return Forecast (%)
Graph: Northern Trust 5-Year Annualized Private Investments Return Forecast (%)
Source: Northern Trust Asset Management, Bloomberg. Data from 12/31/1990 to 3/31/2021. *2020s through 3/31/2021.
6 Key Themes
Our Capital Market Assumptions five-year market outlook provides insight into the forces shaping the investing landscape for the coming years. Here are the six key themes driving our strategic outlook and asset allocation for the next five years.

Building Smart Portfolios

Our forward-looking, historically aware investment approach powers a breadth of capabilities and solutions — spanning a full spectrum of asset class strategies and investment styles — to meet a variety of portfolio needs.
Download Our 5-Year Outlook
Find out what investors should expect in the years ahead.
Download Executive Summary
Every year, Northern Trust’s Capital Market Assumptions Working Group develops forward-looking, historically aware forecasts for global economic activity and financial market returns — which drive our five-year asset class return expectations and inform our asset allocation decisions.

All of this comes together in the form of our long-term strategic asset class allocation suggestions, which are used by institutional and individual investors worldwide.
Dan Phillips, CFA
Director, Asset Allocation Strategy
CMA Working Group Chair
Dan Ballantine, CFA
Investment Strategist
Ryan Boyle
Northern Trust Senior Economist
Mark Carlson, CFA
Senior Investment Strategist, Fixed Income
Colin Cheesman, CFA
Investment Analyst
Michael De Juan
Director, Portfolio Strategy
Dan Farrell
Director, EMEA Cash Management
Chris Huemmer, CFA
Senior Investment Strategist, Equities
Eric Lee, CFA
Investment Strategist
Jim McDonald
Northern Trust Chief Investment Strategist
Peter Mladina
Director, Portfolio Research
Wealth Management
Katie Nixon, CFA
Chief Investment Officer
Wealth Management
Dan Personette, CFA
Director, Interest Rate Strategy
Brad Peterson, CFA
Senior Portfolio Manager
Wealth Management
Colin Robertson
Managing Director, Fixed Income
Chris Shipley
Director, Fundamental Equities
Wouter Sturkenboom, CFA
Chief Investment Strategist,
Carl Tannenbaum
Northern Trust Chief Economist
Eric Williams
Director, Credit Strategy
Peter Yi, CFA
Director, Cash Managment
Northern Trust Asset Management

Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long-term objectives.

Entrusted with $1.3 trillion of investor assets as of December 31st, 2021, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy.

$885 Billion in A U M1

That’s why we combine robust capital markets research, expert portfolio construction and comprehensive risk management to craft innovative and efficient solutions that deliver targeted investment outcomes.

As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect, and transparency.

1Assets under management as of December 31, 2018. For the Northern Trust Asset Management entities included in the A U M total, please see disclosure at end of this page.