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The 2023 edition of our 10-Year Capital Market Assumptions (CMAs) offers our projections for asset class returns, volatilities and correlations over the next decade. This yearly exercise helps in shaping the design of our investors’ long-term portfolios.


Download the full Capital Market Assumptions Report here.

Executive Summary


Slowing global economic growth and the persistence of elevated inflation have weighed heavily on market returns in 2022. With limited evidence of victory in their battle against inflation, monetary policymakers have remained resolute in their hawkish view and continue with tightening monetary policy. There have been few “safe-haven” assets in 2022, regardless of asset class, geography, market cap, style, credit quality and/or duration.


However, looking forward, the increased market volatility and asset repricing during 2022 have driven notable changes to our 2023 forecasts relative to our forecasts just a year ago.


Key Takeaways: Higher Expected Returns


  • Our 2023 10-Year CMAs forecast higher expected returns across most asset classes when compared to 2022 assumptions (see table below).
  • Equity market expected returns have increased due to slightly higher long-term growth rates and upward valuation adjustments (most notably in emerging markets).
  • Fixed income asset class expected returns have reverted to levels not seen in many years, significantly higher when compared to 2022 given the dramatic increase in global bond yields.
  • Alternative asset class expected returns are generally higher and in line with publicly traded markets on a risk-adjusted basis plus incremental return for alpha and illiquidity.


Snapshot of 2023 vs. 2022 10-year Capital Market Return Assumptions

Themes to Watch


Looking beyond the next 10 years, we also explore the impact of themes that may shape market expectations and impact these forecasts over a longer timeframe.


  • Geopolitical challenges — Continued geopolitical tensions may result in further deglobalization and reshoring, impacting variable costs, corporate margins and investor returns.
  • Environment, Social and Governance — We expect ESG and responsible investing to increasingly influence investor allocation decisions and thereby have a potentially larger impact on financial markets for years to come.


Macroeconomic Backdrop


When building capital market assumptions, we start with projections of inflation, real GDP growth, short-term interest rates and currency rates. Inflation and real GDP growth are key drivers of our expected earnings growth for equity. Projections of inflation and real cash rates are extremely influential in projecting fixed income yields and returns.


The economic projections underpinning our asset class return assumptions are based on three economic scenarios outlined in BNY Mellon Investment Management’s 2022 Q4 Vantage Point. These scenarios take into account pressing issues facing the world economy including the ongoing energy crisis, triggered by Russia’s invasion of Ukraine; persistent core inflation driven by tight labor markets and high wage inflation and, China’s zero-Covid policy and property deflation.


We develop return expectations under each of these scenarios, then probability weight the returns to determine our overall “expected” return. This approach allows us to not only analyze portfolios based on the expected case, but also to shock the portfolio under the various scenarios. We encourage you to read the latest Vantage Point to learn more about our economic projections.


Importance of Capital Market Assumptions


Capital market assumptions are the initial building block for the development of an investor’s strategic asset allocation (SAA). However, forecasting is an inherently error-prone endeavor, because financial market performance exhibits a high degree of uncertainty.


When designing a policy portfolio to weather the highs and lows of the coming market cycle, we propose investors consider a “robust” portfolio, rather than an “optimal” one. To learn more, please contact your BNY Mellon representative.


Download the full Capital Market Assumptions here. 

Download a PDF of this Capital Market Assumptions Executive Summary here.

For Financial Professionals and Institutional Investors Only.


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For Financial Professionals and Institutional Investors Only.


This material should not be considered as investment advice or a recommendation of any investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Any statements and opinions expressed are as at the date of publication, are subject to change as economic and market conditions dictate, and do not necessarily represent the views of BNY Mellon or any of its affiliates. The information has been provided as a general market commentary only and does not constitute legal, tax, accounting, other professional counsel or investment advice, is not predictive of future performance, and should not be construed as an offer to sell or a solicitation to buy any security or make an offer where otherwise unlawful. The information has been provided without taking into account the investment objective, financial situation or needs of any particular person. BNY Mellon and its affiliates are not responsible for any subsequent investment advice given based on the information supplied. This is not investment research or a research recommendation for regulatory purposes as it does not constitute substantive research or analysis. To the extent that these materials contain statements about future performance, such statements are forward looking and are subject to a number of risks and uncertainties. Information and opinions presented have been obtained or derived from sources which BNY Mellon believed to be reliable, but BNY Mellon makes no representation to its accuracy and completeness. BNY Mellon accepts no liability for loss arising from use of this material.


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GU-333 – 31 December 2023