Capital Group Issues 2025 Capital Market Assumptions

Firm lowers 20-year estimates for equities and bonds from last year

Overall outlook is still positive for long-term investors across global markets

LOS ANGELES, Feb. 13, 2025 /PRNewswire/ -- Capital Group, one of the world's largest and most experienced active investment managers, issued its 2025 capital market assumptions (CMAs), which represent the company's long-term expectations for returns, as well as correlations and volatilities of major asset classes over a 20-year time horizon. Capital Group's CMAs serve as the foundational inputs for the quantitative models that inform the firm's solutions offerings.

"The outsized returns on U.S. equities over the past two years, increasing markets concentration and high stock valuations are factors we need to consider as we think about long-term portfolio construction," said Maddi Dessner, head of asset class services at Capital Group. "While we've lowered our return expectations for global equities, we expect to continue to see bright pockets of opportunity driven by structural and cyclical factors. We expect fixed income returns to exceed what was realized over the last 20 years."

"Despite the geopolitical landscape having shifted quite significantly, with elections held last year in 64 countries and the European Union, overall prospects for economic growth around the world remain healthy," said Alexandra Haggard, head of asset class services for Europe and Asia at Capital Group. "An uptick in capital expenditure, especially in developed markets, the deepening of capital markets, the productivity enhancements from artificial intelligence and a broader adoption of digitization across the world are expected to support growth in both developed and emerging markets."

Capital Group's 2025 capital market assumptions note: 

• Central banks have made good progress at mitigating and reversing inflationary trends. Economic growth and inflation across developed and emerging markets remain largely intact.
• Higher interest rates are expected to persist across major markets amid relatively robust economic growth.
• The U.S. dollar is forecast to depreciate against a broad basket of currencies, but the pace of that depreciation has been marked down compared to last year due to wider differentials on productivity between the U.S. and other countries.

Asset class return expectations:

Capital Group's 2025 capital market assumptions are available here.

About Capital Group

Capital Group, home of American Funds, has been singularly focused on delivering superior results for long-term investors using high-conviction portfolios, rigorous research, and individual accountability since 1931.

As of December 31, 2024, Capital Group manages more than $2.8 trillion in equity and fixed income assets for millions of individuals and institutional investors around the world. Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

For more information, visit capitalgroup.com.

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Advisory services offered through Capital Research and Management Company (CRMC) and its RIA affiliates. Capital Client Group, Inc., member FINRA.

This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.

This analysis represents the views of a small group of investment professionals based on their individual research and are approved by the Capital Market Assumptions Oversight Committee. They should not be interpreted as the view of Capital Group as a whole. As Capital Group employs The Capital System, the views of other individual analysts and portfolio managers may differ from those presented here. They are provided for informational purposes only and are not intended to provide any assurance or promise of actual returns. They reflect long-term projections of asset class returns and are based on the respective benchmark indices, or other proxies, and therefore do not include any outperformance gain or loss that may result from active portfolio management. Note that the actual results will be affected by any adjustments to the mix of asset classes. All market forecasts are subject to a wide margin of error.

Risk factors you should consider before investing:

• This material is not intended to provide investment advice or be considered a personal recommendation.
• The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment.
• Past results are not a guide to future results.
• If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease. Currency hedging seeks to limit this, but there is no guarantee that hedging will be totally successful.
• Depending on the strategy, risks may be associated with investing in fixed income derivatives, emerging markets and/or high-yield securities; emerging markets are volatile and may suffer from liquidity problems.

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