Alternative Thinking

2020 Capital Market Assumptions for Major Asset Classes (Supplemental Estimates as of March 31, 2020)

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2020 Capital Market Assumptions for Major Asset Classes (Supplemental Estimates as of March 31, 2020)

This supplement provides a special update to our estimates of medium-term (5- to 10-year) expected returns for major asset classes. This update reflects the large changes in prices for many asset classes due to the impact of COVID-19 in Q1 2020. We believe our estimates are reasonable midpoints for setting medium-term expectations. However, uncertainty is even higher than normal, suggesting large allocation shifts are unlikely to be warranted. 

Chart of Expected real returns for liquid asset classes Q1

Source: AQR, Consensus Economics, Bloomberg and Barclays. Estimates as of December 31, 2019. Error bars cover 50% confidence range, based on analysis from Alternative Thinking Q1 2018 and adjusted for current expected volatilities. These are intended to emphasize the uncertainty around any point estimates. Not only are the return forecasts uncertain, but also any measures of forecast uncertainty are debatable. Forecasting requires humility at many levels. Estimates are for illustrative purposes only, are not a guarantee of performance and are subject to change. Not representative of any portfolio that AQR currently manages.

U.S., Non-U.S. Developed and Emerging Market Equities
 Source: AQR, Consensus Economics and Bloomberg. Estimates and methodology subject to change and based on data as of December 31, 2019. “Non-U.S. Developed Equities” is cap-weighted average of Euro-5, Japan, U.K., Australia and Canada. “Euro-5” is a cap-weighted average of large-cap indices in Germany, France, Italy, Netherlands and Spain. Each estimate is the average of two approaches, based on earnings and payouts (both dividends and buybacks) respectively. See main article for details. 

U.S. 10Y Treasuries and Non-U.S. 10Y Govt Bonds

Source: Bloomberg, Consensus Economics and AQR. Estimates as of December 31, 2019. Rolldown return is estimated from fitted yield curves and based on annual rebalance. “Non-U.S. 10Y govt. bonds” is GDP-weighted average of Germany, Japan, U.K., Australia, Canada.

U.S. IG Credit and U.S. HY Credit
 Source: Barclays, Bloomberg, AQR. Estimates as of December 31, 2019. OAS and duration data is for Barclays U.S. Corporate Investment Grade (IG) Index and Barclays U.S. Corporate High Yield (HY) Index. Index durations are 7.9 years and 3.1 years respectively.

 Long-run average return of an equal-dollar-weighted portfolio of commodity futures.

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About the Portfolio Solutions Group
The Portfolio Solutions Group (PSG) provides thought leadership to the broader investment community and custom analyses to help AQR clients achieve better portfolio outcomes.

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The information contained herein is only as current as of the date indicated, and may be superseded by subsequent market events or for other reasons. The views and opinions expressed herein are those of the author and do not necessarily reflect the views of AQR Capital Management, LLC, its affiliates or its employees. This information is not intended to, and does not relate specifically to any investment strategy or product that AQR offers. It is being provided merely to provide a framework to assist in the implementation of an investor’s own analysis and an investor’s own view on the topic discussed herein. Past performance is not a guarantee of future results.


Hypothetical performance results have many inherent limitations, some of which, but not all, are described herein. The hypothetical performance shown was derived from the retroactive application of a model developed with the benefit of hindsight.  Hypothetical performance results are presented for illustrative purposes only.


Diversification does not eliminate the risk of experiencing investment loss.


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