Invesco’s 2020 Long-Term Capital Market Assumptions outlines a lower-return, higher-volatility decade ahead, challenging the effectiveness of traditional portfolio construction. The paper argues a standard 60/40 portfolio may fall short of investor expectations, while diversification into non-US equities and alternatives could become increasingly necessary.
2020 Long-Term Capital Market Assumptions
Invesco
Harry Markowitz
Research
68 Pages
Key Takeaways
60/40 Return Compression: Expected returns for a US 60/40 portfolio fall to 4.3% over the next decade, roughly half the prior decade, with risk rising to 9.9%.
Non-US Equity Advantage: Emerging and non-US developed equities are projected to deliver higher returns than US equities, albeit with increased volatility and dispersion across regions.
Alternatives Gain Relevance: Private equity, private debt, and hedge strategies show stronger forward return assumptions relative to history, offering diversification benefits amid declining bond yields.
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