BlackRock Investment Institute | February 2025

Capital market assumptions

19-Feb-2025
  • BlackRock Investment Institute
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Latest update to our CMAs

Our latest capital market assumptions (CMAs) include India rupee-denominated CMAs to capture the long-term opportunity we see unfolding in India. Our CMAs also reflect the rise in global bond yields through Q4. The rise in yields prompts us to increase our overweight to developed market government bonds – but this overweight is based on a preference for short- and medium-term maturities. We stay underweight long-term U.S. Treasuries. The jump in U.S. yields has mostly been driven by investors demanding more compensation, or term premium, for the risk of holding long-term bonds. We still see more U.S. term premium building amid persistent fiscal deficits and inflation. We go underweight investment grade (IG) credit as we see credit spreads widening from currently tight levels on a strategic horizon of five years and longer.

We outlined in our 2025 global outlook that we’re in an era of transformation: mega forces are reshaping economies and their long-term trajectories. We believe private markets will play a key role financing this transformation – with an artificial intelligence (AI)-driven investment boom potentially favoring infrastructure equity and private credit stepping in as a source of capital in a rapidly evolving U.S. financial landscape. In public markets, we advocate for larger allocations to Japanese equities than most investors hold. We stay overweight emerging market equities, with Indian equities offering fair long-term value in our view, given how they stand to benefit from the intersection of mega forces.

Notes: U.S. dollar return expectations for all asset classes are shown in unhedged terms, with the exception of global ex-US Treasuries and hedge funds. Euro return expectations for all asset classes are shown in hedged terms, with the exception of regional equity markets, Chinese government bonds, local-currency EM debt and private markets other than hedge funds. Sterling return expectations for all asset classes are shown in hedged terms, with the exception of regional equity markets, Chinese government bonds, local-currency EM debt and private markets other than hedge funds. Japanese yen return expectations for all asset classes are shown in hedged terms, with the exception of regional equity markets, Chinese government bonds, local-currency EM debt and private markets other than hedge funds. Swiss franc return expectations for all asset classes are shown in hedged terms, with the exception of EM equity, US large cap, European large cap, Chinese equities, China A-share equities, Chinese government bonds, local-currency EM debt and private markets other than hedge funds. Canadian dollar return expectations for all asset classes are shown in unhedged terms, with the exception of global corporate bonds, hedge funds and global government bonds. Australian dollar return expectations for all asset classes are shown in unhedged terms, with the exception of global corporate bonds, hedge funds, global aggregate bonds and global government bonds. New Zealand dollar return expectations for all asset classes are shown in unhedged terms, with the exception of hedge funds, global corporate bonds, global aggregate bonds and global government bonds. Chinese yuan return expectations for all asset classes are shown in hedged terms, with the exception of regional equity markets, local-currency EM debt and private markets other than hedge funds. South African rand return expectations for all asset classes are shown in unhedged terms, with the exception of hedge funds. Mexican peso return expectations for all asset classes are shown in unhedged terms, with the exception of hedge funds, global government bonds. Singapore Dollar return expectations for all asset classes are shown in hedged terms, with the exception of regional equity markets, local-currency EM debt and private markets other than hedge funds. Hong Kong Dollar return expectations for all asset classes are shown in hedged terms, with the exception of regional equity markets, local-currency EM debt and private markets other than hedge funds. Indian Rupee return expectations for all asset classes are shown in hedged terms, with the exception of regional equity markets, local-currency EM debt and private markets other than hedge funds.

Investment perspectives

We hold an above-benchmark allocation to Japanese equities in long-term portfolios as a benign macro backdrop brightens the outlook for corporate profits.
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