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Investing Specialists

Experts Forecast Stock and Bond Returns: 2021 Edition

Nearly every firm has ratcheted down return expectations, but international equity remains a bright spot.

When I last compiled investment firms’ long-term asset-class return forecasts, in April 2020, most of the companies surveyed were feeling at least somewhat sanguine about stocks’ prospects. Equities had fallen sharply in the first quarter of 2020, and several of these firms cited attractive valuations as a likely contributor to better returns ahead.

Nine months and a series of strong stock and bond returns later, however, and bullish forecasts for the U.S. equity market are scarce. Bond-market bulls are few and far between, too. While a 60/40 portfolio composed of U.S. large caps and investment-grade bonds has been tough to beat over the past decade, most of the firms in our survey are forecasting constrained returns for those asset classes going forward. One glimmer of hope is that each of the firms is forecasting better returns for foreign stocks than U.S.-domiciled companies. Firms differ on whether emerging-markets or developed-markets stocks have more upside potential today, however. Whereas a year ago many of the firms believed that emerging markets would enjoy better returns than developed markets, several believe that a strong recovery in emerging-markets equities in 2020 diminishes their upside potential going forward.