Capital Market Assumptions for Major Asset Classes

AQR

Thomas Maloney

Research

19 Pages

AQR updates its five to ten year expected returns across major asset classes and explains how starting valuations shape the math. Expected real returns have improved since the 2021 low, yet risk premia still look compressed after another strong equity year. A global 60/40 portfolio is pegged around a 3.4% expected real return, well below long run norms.

Date published: January 14, 2026

 

Source: Bloomberg, Consensus Economics and AQR. Estimates as of December 31, 2025.
Source: MSCI and AQR. Weights as of December 31, 2025. The 60% allocation to MSCI ACWI is assumed to be unhedged. The 40% allocation to global bonds is assumed to be hedged.

Key Takeaways

Returns look capped: Higher bond yields help, but rich equity valuations still compress forward looking portfolio returns.
Do not bank on reversion: Assumptions avoid valuation mean reversion, keeping forecasts grounded in current prices.
Currency risk matters: Hedging decisions can meaningfully change realized returns once growth and rate paths diverge globally.
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