Key Takeaways
- • J.P. Morgan Asset Management released its 2027 Long-Term Capital Market Assumptions (31st edition), projecting a 7.0% annual return for a USD 60/40 stock-bond portfolio over the next 10-15 years.
- • A 60/40+ portfolio with 30% in diversified alternatives projects a 7.5% return and a 21% lift in the Sharpe ratio versus the simple 60/40 approach.
- • Global aggregate bond forecasts rise to 5.3%, the highest in two decades, up from a low of 2.1% in 2021, driven by higher real yields.
- • U.S. large cap equity forecast rises 80bps to 7.5%, pushing developed market equity projections above emerging markets for the first time in the publication's history.
- • Diversified hedge funds are upgraded 140bps to 6.7%, reflecting sustained alpha trends and higher rates, while private equity is projected at 9.8%.
Summary
J.P. Morgan Asset Management today released its 2027 Long-Term Capital Market Assumptions (LTCMAs), a comprehensive 10-15 year outlook for returns and risks across asset classes, as inflation uncertainty and market volatility remain elevated. The forecast annual return for a USD 60/40 stock-bond portfolio rises to 7.0%, but higher stock-bond correlations make further diversification necessary, according to the report.
The firm's central thesis is that a global investment surge centered on artificial intelligence, extending to 2040, will boost total factor productivity by 50% to 120bps. The report projects U.S. real GDP growth of 2.1% and developed world nominal growth of 4.2%, which it describes as the best developed world growth outlook in 15 years. Labor and demographic constraints, however, continue to weigh on long-term growth, and the report expects inflation to remain more volatile over the forecast horizon given large government deficits and a more complex geopolitical backdrop.
For portfolio construction, the report highlights alternatives as a key source of return and diversification. A balanced portfolio with 30% in diversified alternatives is projected to return 7.5%. Diversified hedge funds are forecast at 6.7%, up from 5.3% last year, reflecting higher alpha estimates. Private equity is projected at 9.8%, a slight decrease, with return potential tied to repeatable value creation and operational efficiencies, including AI use across portfolio companies. U.S. core real estate is forecast at 8.1%, European core real estate at 7.1%, global core infrastructure at 7.1%, and broad basket commodities at 4.8%, with gold unchanged at 5.5%.
In fixed income, U.S. intermediate Treasuries are expected to return 4.6%, U.S. investment grade credit 6.1%, and U.S. high yield credit 6.7%, the latter with a fair value spread of 440bps. In equities, U.S. large cap is forecast at 7.5%, global equities at 7.5% (USD), and emerging markets at 7.1% (USD), which the report attributes to normalizing AI and capex tailwinds. The report also introduces a return range for bitcoin but does not include it as an allocation.
John Bilton, Global Head of Strategic Research for Multi-Asset Solutions, said the assumptions help investors navigate markets reshaped by economic nationalism, accelerating technology, and shifting capital flows. Grace Peters, Global Co-Head of Investment Strategy for J.P. Morgan Private Bank, said optimizing risk and return together is the imperative. The LTCMAs draw on inputs from over 90 portfolio managers, economists and research analysts and cover more than 200 assets in over 20 base currencies. J.P. Morgan Asset Management reported $4.8 trillion in assets under management as of September 30, 2026. The report carries standard caveats that assumptions are passive, scenario-dependent and not investment advice.
The firm's central thesis is that a global investment surge centered on artificial intelligence, extending to 2040, will boost total factor productivity by 50% to 120bps. The report projects U.S. real GDP growth of 2.1% and developed world nominal growth of 4.2%, which it describes as the best developed world growth outlook in 15 years. Labor and demographic constraints, however, continue to weigh on long-term growth, and the report expects inflation to remain more volatile over the forecast horizon given large government deficits and a more complex geopolitical backdrop.
For portfolio construction, the report highlights alternatives as a key source of return and diversification. A balanced portfolio with 30% in diversified alternatives is projected to return 7.5%. Diversified hedge funds are forecast at 6.7%, up from 5.3% last year, reflecting higher alpha estimates. Private equity is projected at 9.8%, a slight decrease, with return potential tied to repeatable value creation and operational efficiencies, including AI use across portfolio companies. U.S. core real estate is forecast at 8.1%, European core real estate at 7.1%, global core infrastructure at 7.1%, and broad basket commodities at 4.8%, with gold unchanged at 5.5%.
In fixed income, U.S. intermediate Treasuries are expected to return 4.6%, U.S. investment grade credit 6.1%, and U.S. high yield credit 6.7%, the latter with a fair value spread of 440bps. In equities, U.S. large cap is forecast at 7.5%, global equities at 7.5% (USD), and emerging markets at 7.1% (USD), which the report attributes to normalizing AI and capex tailwinds. The report also introduces a return range for bitcoin but does not include it as an allocation.
John Bilton, Global Head of Strategic Research for Multi-Asset Solutions, said the assumptions help investors navigate markets reshaped by economic nationalism, accelerating technology, and shifting capital flows. Grace Peters, Global Co-Head of Investment Strategy for J.P. Morgan Private Bank, said optimizing risk and return together is the imperative. The LTCMAs draw on inputs from over 90 portfolio managers, economists and research analysts and cover more than 200 assets in over 20 base currencies. J.P. Morgan Asset Management reported $4.8 trillion in assets under management as of September 30, 2026. The report carries standard caveats that assumptions are passive, scenario-dependent and not investment advice.
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