FIVE-YEAR OUTLOOK AT A GLANCE

Our five-year themes – combined with a historical analysis of financial market return drivers and asset class relationships – form the basis for our five-year capital market assumptions. Click each box for an overview of our 2016 Capital Market Assumptions, or go to www.northerntrust.com/5yearoutlook to download the full paper.


  • Market Cycles in a Cycle-less Economy
  • Stuck-flation
  • Cost of Ultra-Low Rates

Market Cycles in a Cycle-less Economy. The global economy is in a narrow and slow growth channel in which traditional cycles have been suppressed.

Stuck-flation. As supply easily matches demand, central bankers will find it difficult to dislodge "stuck" inflation.

Costs of Ultra-Low Rates. The costs of low rates are threatening to outweigh the benefits, but central bankers may have no choice but to continue.

2.1%

expected total returns for global investment-grade fixed income

Fixed Income. Returns are hobbled by a low-yield starting point, but low-yield continuation supports prices.

5.4%

expected total returns for developed market equities

Equities. Returns will be modest; slow global growth hurts the revenue outlook.

5.6%-6.9%

expected total real asset returns

Real Assets. Natural resources will benefit from a supply response to lower prices. Global listed infrastructure will remain a highly valued bond market proxy.

3.4%-7.4%

expected total returns for alternatives

Alternatives. Hedge fund returns will be hurt by lower risk exposure returns and lower alpha. Private equity will see a slight moderation in its illiquidity premium.

  • Slow Growth Angst
  • Populist Roulette
  • Technology Turbulence

Slow Growth Angst. Slow growth is the reality globally, creating a cycle in which concerns about slow growth are further hurting the growth outlook.

Populist Roulette. The rise of populist movements globally is leaving the markets uncertain of what to expect from the political arena.

Technological Turbulence. Government policies aimed at protecting jobs will impede further efficiency gains from the digital era.

Source: Northern Trust Capital Market Assumptions Working Group, Investment Policy Committee. Five year forecasts developed annually; most recent forecasts released 7/18/2016.