Robeco outlines a five-year outlook focused on expected returns across asset classes in a world transitioning away from ultra-loose monetary policy. Strong past returns driven by liquidity have left valuations stretched, implying lower forward returns, with equities expected around 5.5% annually. The paper suggests normalization may hurt bonds more than stocks.
Expected Returns – Escaping the Hall of Mirrors
Robeco
Research
117 Pages
Key Takeaways
Muted Equity Returns: Developed equities are projected to return about 5.5% annually, down from prior cycles, reflecting elevated valuations and slower earnings growth.
Bond Return Compression: Government bond returns could fall toward 0.25%–0.75% as yields normalize from ~1% to 3%, creating price headwinds and limited income buffers.
Emerging Market Advantage: Emerging equities are expected near 6.75% returns, outperforming developed markets due to relatively lower valuations despite historically higher volatility levels above 20%.
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