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JP Morgan Asset Management sees EMs doing better than expected

It says investors shouldn't rely on a static 60/40 portfolio to deliver an 8 per cent return.

Genevieve Cua

Published Wed, Dec 21, 2016 · 5:50 am
In its 2017 long-term capital-market assumptions, JP Morgan Asset Management has adjusted its 10 to 15-year expected rates of return for a typical 60/40 portfolio - 60 per cent in equities and 40 per cent in bonds - downwards yet again, from an estimated 6.3 per cent to roughly 5.5 per cent. It also expects the fed funds rate to normalise at an average of around 2.25 per cent.

SENTIMENT and fund flows may have soured lately over the emerging markets (EMs), but JP Morgan Asset Management believes this investment sector is likely to hold up better than most expect despite the headwinds.

The firm, which recently published a study on its 2017 long-term capital-market assumptions, expects EMs to post real GDP (gross domestic product) growth of 4.5 per cent, a tad lower than the 2016 growth of 5 per cent. Still, it is markedly stronger than developed markets' (DMs) expected growth of 1.5 per cent in 2017, and 1.75 per cent for 2016.

The narrowing of the spread between EM and DM growth reflects DMs' demographic challenges and EMs' potential deleveraging cycle.

Says John Bilton,...

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