2025 Q1 Capital Market Assumptions
Key Updates in This Quarter's Forecasts
Our long-term outlook for fixed income assets shifted significantly higher from last quarter, coincident with the increase in sovereign
interest rates in Q4 2024. Adjustments to our 10-year annualized return forecasts include:
- US Aggregate Bonds: Revised to 5.23% from 4.09% last quarter.
- US Long Treasury Bonds: Revised to 5.84% from 4.26% last quarter.
- Global Aggregate Bonds Hedged: Revised to 4.56% from 3.85% last quarter.
Our 10-year forecasts for equity markets outside the US continue to exceed those of large-capitalization US equities, primarily attributable to more favorable valuations:
- US Large-Cap Equities: Forecasted at 5.79%.
- International Equities ex-US: Forecasted at 8.27%.
- Emerging Markets Equities: Forecasted at 8.79%.
This quarter’s portfolio rebalancing recommendations include:
- Reduction in US Equity allocation.
- Reduction in Commodity allocation.
- Increase in Fixed Income exposure.
Source: PGIM Quantitative Solutions as of 31 Dec, 2024. Forecasts may not be achieved and are not a guarantee or reliable indicator of future results.
Note: Forecasts may not be achieved and are not a guarantee or reliable indicator of future results
