Total Return Forecasts: Major Asset Classes - December 2, 2025

Long-term expectations for the Global Market Index (GMI) remain at an annualized total return above 7% based on data through November, with the forecast stable and ticking up slightly from last month. The majority of GMI components are projected to outperform their trailing 10-year returns, while US equities, commodities and US high-yield bonds are the notable exceptions. The projection comes from James Picerno, director of analytics at The Milwaukee Co., adviser to The Brinsmere Funds, and signals modestly constructive long-term asset-allocation assumptions for multi-asset investors.

Analysis

Market structure: A steady 7%+ GMI long-term return with US equities, commodities and US high-yield as the laggards implies a relative shift toward non‑US equities and investment‑grade credit. Expect incremental flows into ACWI ex‑US/EFA/EEM and IG corporate ETFs (LQD) at the expense of SPY, HYG and commodity ETFs (GLD, DBC), which will compress risk premia in beaten‑up segments and lift multiples in favored ones over 6–24 months. Currency action is likely: a sustained reallocation out of US assets would pressure the USD by 1–3% annually, amplifying local returns for EM and non‑USD developed markets.

Risk assessment: Tail risks include a Fed pivot that re‑prices real yields (+50–100bp shock), a China growth shortfall reducing global trade (-1–2% GDP surprise), or a commodity supply shock reversing the commodity underperformance thesis. Short term (days–weeks) sentiment and macro prints (US CPI, Fed minutes, China PMI) can flip flows; medium (3–12 months) credit spread or FX moves matter most; long term (1–3 years) earnings and productivity trends drive realized GMI. Hidden dependency: a move into IG credit increases duration exposure — a bad inflation surprise would punish that trade.

Trade implications: Implement relative‑value and defensive bias: small tactical long positions in EFA/IEFA and EEM for 6–12 months, paired with trims/shorts in SPY or US‑centric growth names; overweight IG corporates (LQD) vs underweight HYG. Use options to buy downside protection on US equities (3‑month SPY 5% OTM puts) while selling 6–9 month covered calls on commodity exposures. Sector rotation: overweight non‑US financials/industrial exporters, underweight US energy/materials and cyclical commodities for 3–12 months.

Contrarian angles: Consensus may underweight US equities solely on 10‑year trailing returns — this misses profit‑margin resilience and tech earnings optionality; a continued soft landing could see SPY outperform for 6–9 months, making blunt short positions risky. Commodities underperformance could be mean‑reverting if geopolitics or supply disruptions hit; avoid outright large shorts without event hedges. Unintended consequence: piling into IG credit and non‑US equities raises vulnerability to a USD rally or sudden rate shock, so size positions modestly and hedge duration.

Key Decisions for Investors

• Establish a 2–3% portfolio long in EFA (iShares MSCI EAFE) and a 1–2% long in EEM (iShares MSCI Emerging Markets) combined, target 6–12 month horizon; add if DXY falls >2% or MSCI EAFE outperforms SPY by >150 bps over 3 months.
• Initiate a 3% long position in LQD (iShares iBoxx $ IG) and reduce HYG exposure by 50% (or short HYG equal to 1–2% notional) to capture expected IG outperformance versus HY over the next 3–12 months; trim LQD if US 10‑yr yield rises >50 bps from current levels.
• Enter a pair trade: long IEFA (2%) vs short SPY (1.5%) to express non‑US overweight relative to US for 3–9 months; exit/flip if SPY rebounds and outperforms IEFA by 200 bps in a rolling 3‑month window.
• Buy 3‑month SPY 5% OTM puts equal to 0.5–1% portfolio notional as tail protection and sell 6–9 month covered calls on existing commodity positions (GLD, DBC) to harvest premium; reassess if commodity indices drop >10% or CPI ex‑food/energy falls by >0.2% MoM.
• Avoid initiating new long positions in commodity producers and US high‑yield funds for now; if commodities or HY cheapen by >15% relative to 6‑month averages, consider tactical re‑entry with event‑driven hedges (options or CDS) within a 3–6 month window.