Total Return Forecasts: Major Asset Classes - September 3, 2025

The Global Market Index (GMI) long-run expected total return remained in the low-7% range in August, a figure notably below its trailing 10-year performance. This indicates a more subdued forward-looking outlook for the optimal global portfolio, with US equities and commodities specifically highlighted as downside outliers for expected returns relative to their strong performance over the past decade.

Analysis

The long-run total return forecast for the Global Market Index (GMI) held steady in the low-7% range as of August, a projection that is notably below its actual trailing 10-year performance. This disparity signals a significant moderation in forward-looking return expectations for an optimal, globally diversified portfolio. The analysis, based on an average of three models, specifically identifies US equities and commodities as 'downside outliers,' indicating their expected returns are particularly subdued when contrasted with their strong performance over the past decade. The overall cautious tone and mildly negative sentiment underscore a potentially more challenging investment landscape ahead, where historical returns may not be a reliable guide for future gains.

Key Decisions for Investors

• Investors should recalibrate their long-term portfolio return assumptions downwards, as the projected low-7% GMI return is substantially below the performance achieved over the last decade.
• A strategic review of asset allocation is prudent, particularly concerning overweight positions in US equities and commodities, which are flagged for weaker forward-return prospects relative to their recent history.
• Given the subdued outlook for broad market beta, maintaining a well-diversified global portfolio is crucial, and investors might consider if current allocations are overly dependent on asset classes that have driven past returns.