This article updates AQR’s estimates of medium-term (5- to 10-year) expected returns for major asset classes. In 2022 expected returns moved slightly higher for equities, and sharply higher for bonds and cash. The expected real return of a 60/40 portfolio increased to 3%, near its decade high but still well below the long-term average of nearly 5% (since 1900), and even further below realized returns of the previous decade.
The article also includes two focus topics: one highlighting the case for emerging market equities, and the other assessing the impact of large interest rate rises on various risk premia—some of which appear compressed at the start of 2023.
Exhibit 1: Medium-Term Expected Real Returns for Liquid Asset Classes
Source: AQR Research
A full version of the research is available to download right below the Disclaimer statement.
Disclaimer
This does not constitute an offer, solicitation or recommendation to sell or an offer to buy any securities, investment products or investment advisory services. This information generated by the charts, tables, and graphs presented herein is for general informational and general comparative purposes only.
This document may contain forward-looking statements that are based on their current beliefs and assumptions and on information currently available that they believe to be reasonable, however, such statements necessarily involve risks, uncertainties and assumptions, and investors may not put undue reliance on any of these statements.
References to indices or benchmarks herein are for informational and general comparative purposes only. Indexes are unmanaged and have no fees or expenses. An investment cannot be made directly in an index.
The information in this presentation is not intended to provide, and should not be relied upon for, accounting, legal, or tax advice or investment recommendations. Each recipient should consult its own tax, legal, accounting, financial, or other advisors about the issues discussed herein.
