Expected 10-Year Excess Return Forecast
Our forecasting models are grounded upon a solid economic foundation. They reflect current market conditions rather than relying simply upon past returns. We use a "building block" approach to forecasting where we estimate key predictors of return for each asset within the index.
- Yield: Steady state return expected from holding index assets (e.g. current yield for bonds and dividend yield for stocks).
- Growth: Return from the expected growth, reflecting increased prices from growing cash flows (e.g. GDP growth).
- Valuation Change: Return assessing the fair value of each asset (whether the asset is cheap or expensive and assuming mean reversion).
- Diversification Return: Return from holding and rebalancing a diversified set of assets.
- Tactical Alpha: Additional return expected from making short-term tactical allocation adjustments.
These building blocks form the core of our 10-year index forecast. To learn more about our forecast methodology, please visit: Research Affiliates Capital Market Expectations Methodology.
Source: Research Affiliates, LLC, as of December 31, 2023, based in USD.
Note: All data presented herein are forward-looking estimates based on simulated portfolios computed by Research Affiliates, LLC, and do not reflect the performance of any product or strategy. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time, and speak only as of the date they are made. Research Affiliates, LLC assumes no duty to and does not undertake to update forward-looking statements. The data are based upon reasonable beliefs of Research Affiliates, LLC, but are not a guarantee of future performance. Actual results may differ materially.