Time To Turn Tactical – November 22, 2021


A just-published report updated our 10-year projections for all the major global asset markets, which provided sober reading after what has been a booming past 12-18 months.

The investment climate promises to be much more challenging over the next 10 years than in recent decades. Stocks, bonds, real estate, and most other assets have benefited enormously from the persistent decline in interest rates since the early-1980s. Yet the era of declining interest rates is over barring a slide into global deflation that would be lethal for the prices of risk assets. The current rich valuations for most asset classes represent the major headwind for real returns over the next decade. Asset prices already discount a rosy future.

Investors should expect historically meagre returns on a global multi-asset portfolio over the next 10 years because of current elevated valuations and rising bond yields. Consequently, buy-and-hold strategies will be less effective than in the past, while deft tactical allocation shifts will be more important in determining overall portfolio performance than in recent decades.


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