Asset Allocation

Q4 Expected Returns


​In a world of low bond yields and slow economic growth, historically realized 5-6% real (7-8% nominal) asset class returns may be unrealistic expectations for the future. Using a structural “building blocks” approach, we forecast long-term returns, made available in the charts below.​​​​​​​​

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Asset Allocation Quarterly Updates​

We bring you our perspectives on a variety of topics affecting asset allocation.
Listen to our perspectives on capital market expectations, and our views on broad market asset class considerations.


Compare Shiller P/E values across equity markets

  • The Shiller P/E of U.S. large cap stocks is in the 95th percentile of its historical range
  • After a less-than-stellar 2014, the Shiller P/E ratios indicate emerging market countries are cheap
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View real yields across countries and spreads

  • Two trends in Europe are expected to persist: a flattening yield curve and low rates
  • Mexico's yield curve is steep relative to its average so far this century
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Compare real commodity returns over time

  • Coffee was the best-performing commodity in 2014; our models suggest it is overvalued in the long-term
  • After a rough 2014, energy commodities still face headwinds from term structures in contango
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The Research Affiliates Approach to Capital Markets Forecasting

With the objective of providing transparency into our long-term expected returns, these documents detail the methodologies underlying our models.  

A good place to start is with the methodology overview document which provides background on the building blocks approach.  This is the common framework that serves as the foundation upon which each model is built.  Each asset class then has its own methodology document detailing specifics related to that asset class.  These are living documents which will evolve over time, and we encourage you to check back in the future for updates.

Deepen Your Understanding

Yesterday’s Gone: Year-End Capital Markets Commentary and ExpectationsWith updated return expectations, we estimate that the performance of U.S. stocks and bonds over the next 10 years will be significantly lower than long-term historical averages. Other asset classes may produce moderately better returns.
Our Investment BeliefsResearch Affiliates’ central philosophy holds that opportunity arises from long-horizon mean reversion. This conclusion rests on three core beliefs about investors’ preferences, asset prices, and the vital importance of conviction.
What Are We Doing to Our Young Investors?With the growing use of target date funds, young workers’ defined contribution (DC) portfolios are increasingly concentrated in stocks. But in a recession many young workers cash out their DC assets to meet living expenses. A potential solution: less risky starter portfolios.