U.S. equities climbed this week on strong earnings and AI optimism—even as markets weathered renewed U.S.-China tensions and fresh Russia sanctions—while bonds ended flat to down as investors awaited today’s key inflation data and next week’s expected Federal Reserve rate cut. That said, let’s shift focus to how this year’s Long-Term Capital Market Assumptions (LTCMAs) can help translate these near-term swings into long-term portfolio outcomes.
J.P. Morgan Asset Management’s Long-Term Capital Market Assumptions (LTCMAs) are out, setting the stage for how we think about risk, return and portfolio construction for the next 10 to 15 years—not short-term market moves or headlines.
What are the LTCMAs?
They set the tone for how we think about risk, return and portfolio construction every year. Now in their 30th edition, the LTCMAs are more than just a forecast—they’re the engine behind our planning analytics and the backbone of our investment process. Built from the ground up using a transparent, data-driven “building block” approach, we break down expected returns for each asset class into core components such as GDP growth, inflation, yields and valuations. These inputs are stress-tested across over 200 asset classes and 20 currencies, ensuring every projection is grounded in economic reality. The result: a robust, forward-looking framework that underpins over $1 trillion in long-term investment portfolios.
Why do they matter?
They turn insights into action. The LTCMAs drive expected returns and risk for every portfolio scenario, from stress-testing market downturns to mapping out a 20-year retirement plan. Investors can “pre-experience” a range of market conditions, seeing how their goals hold up in everything from bull runs to bear markets. They also help define risk buckets—Liquidity, Lifestyle, Growth and Legacy—each with its own risk profile and time horizon. They calibrate the right risk level for each bucket, ensuring that projected volatility and returns match an investor’s goals. This lets investors walk through best- and worst-case scenarios, visualizing how different allocations would have performed in past crises. It’s not just about averages—it’s about building confidence by understanding trade-offs and making informed decisions.
Why are they relevant through both a short-term and a long-term lens?
This year’s LTCMAs arrive at a pivotal moment as investors are grappling with a world that feels both resilient and uncertain. The headline numbers might seem like modest changes, but the underlying themes are anything but static. The shift beneath the surface is defined by a trio of forces: Economic nationalism is putting up new barriers, dragging on growth and stoking inflation; fiscal activism is back in the spotlight, with governments ramping up spending, fueling demand but also adding to price pressures; and the acceleration of technology—especially AI—is transforming business models, driving capital spending and supercharging productivity, even as it sparks volatility.
With that said, here’s how the LTCMAs can help investors address today’s most pressing questions—and turn today’s concerns into opportunities:
Understanding the “growth gap”
One of the most common questions we hear is, if U.S. GDP growth is projected to slow to 1.8%, how can equity return forecasts remain steady? The answer: Revenue growth, which tracks nominal—not real—GDP, is expected to outpace the growth of the economy.
This clarification is important because investors often focus on real GDP, which is adjusted for inflation, making the gap between 1.8% real GDP growth and 6% revenue growth seem wide. While there’s still a gap between nominal GDP growth of 4.3% and revenue growth, nominal GDP provides a more accurate benchmark for revenue trends.
There are two main reasons for this:
Looking back at history, revenue growth has outpaced nominal GDP over 60% of the time, especially during periods of strong corporate pricing power and innovation. The result: U.S. large caps are projected to return 6.7% annually, even as valuations are expected to be a drag.
Navigating a high bar for valuations
After several years of strong performance, valuations are elevated—and are expected to be a headwind for returns.
The LTCMAs model this by projecting a gradual decline in price-to-earnings ratios from current levels, which will weigh on total returns. Still, there are compelling reasons why valuations can remain higher than historical averages. In the United States, the index composition has shifted toward higher-quality, faster-growing companies—particularly in technology and other sectors with resilient margins and strong global reach. Buybacks are projected to contribute 3.0% to total returns, while gross dilution is expected to be a 1.5% drag. Dividend yields are forecast to stay flat in the near term, then trend up, providing an annualized 1.7% contribution to returns. This means that while the easy gains from multiple expansion may be behind us, the evolving makeup of equity markets and the premium placed on growth and profitability suggest that elevated valuations can persist.
Rethinking diversification
The LTCMAs project that the correlation between stocks and bonds may continue to drift higher and turn positive, reflecting a world of elevated inflation and rate volatility. This doesn’t mean bonds have lost their value as diversifiers—especially when growth scares spook markets. High-quality fixed income still maintains the lowest correlation to equities among liquid assets, and the return to a higher yield environment has restored its capacity to potentially deliver significant positive returns if rates decline. But in a world where stocks and bonds could move in tandem, investors might consider diversifying the diversifiers by adding alternatives such as hedge funds, real assets and private equity—assets that can help cushion portfolios when traditional relationships break down.
Bottom line
The 2026 LTCMAs are more than just a forecast—they’re a call to action. In a world where policy, technology and market dynamics are all in flux, the LTCMAs provide a disciplined, data-driven framework for making informed decisions. They can help investors bridge the gap between short-term concerns and long-term opportunity, turning volatility into a source of strength rather than a risk to be avoided. As always, our team is here to help translate these insights into actionable strategies tailored to each investor’s unique goals and circumstances.
JPMAM LONG-TERM CAPITAL MARKET ASSUMPTIONS
Given the complex risk-reward trade-offs involved, we advise clients to rely on judgment as well as quantitative optimization approaches in setting strategic allocations. Please note that all information shown is based on qualitative analysis. Exclusive reliance on the above is not advised. This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance. Note that these asset class and strategy assumptions are passive only – they do not consider the impact of active management. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Assumptions, opinions and estimates are provided for illustrative purposes only. They should not be relied upon as recommendations to buy or sell securities. Forecasts of financial market trends that are based on current market conditions constitute our judgment and are subject to change without notice. We believe the information provided here is reliable, but do not warrant its accuracy or completeness. This material has been prepared for information purposes only and is not intended to provide, and should not be relied on for, accounting, legal or tax advice. The outputs of the assumptions are provided for illustration/discussion purposes only and are subject to significant limitations.
“Expected” or “alpha” return estimates are subject to uncertainty and error. For example, changes in the historical data from which it is estimated will result in different implications for asset class returns. Expected returns for each asset class are conditional on an economic scenario; actual returns in the event the scenario comes to pass could be higher or lower, as they have been in the past, so an investor should not expect to achieve returns similar to the outputs shown herein. References to future returns for either asset allocation strategies or asset classes are not promises of actual returns a client portfolio may achieve. Because of the inherent limitations of all models, potential investors should not rely exclusively on the model when making a decision. The model cannot account for the impact that economic, market, and other factors may have on the implementation and ongoing management of an actual investment portfolio. Unlike actual portfolio outcomes, the model outcomes do not reflect actual trading, liquidity constraints, fees, expenses, taxes and other factors that could impact the future returns. The model assumptions are passive only – they do not consider the impact of active management. A manager’s ability to achieve similar outcomes is subject to risk factors over which the manager may have no or limited control.
The views contained herein are not to be taken as advice or a recommendation to buy or sell any investment in any jurisdiction, nor is it a commitment from J.P. Morgan Asset Management or any of its subsidiaries to participate in any of the transactions mentioned herein. Any forecasts, figures, opinions or investment techniques and strategies set out are for information purposes only, based on certain assumptions and current market conditions and are subject to change without prior notice. All information presented herein is considered to be accurate at the time of production. This material does not contain sufficient information to support an investment decision and it should not be relied upon by you in evaluating the merits of investing in any securities or products. In addition, users should make an independent assessment of the legal, regulatory, tax, credit and accounting implications and determine, together with their own financial professional, if any investment mentioned herein is believed to be appropriate to their personal goals. Investors should ensure that they obtain all available relevant information before making any investment. It should be noted that investment involves risks, the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Both past performance and yield are not a reliable indicator of current and future results.
Real estate, hedge funds, and other private investments may not be suitable for all individual investors, may present significant risks, and may be sold or redeemed at more or less than the original amount invested. Private investments are offered only by offering memoranda, which more fully describe the possible risks. There are no assurances that the stated investment objectives of any investment product will be met. Hedge funds (or funds of hedge funds): often engage in leveraging and other speculative investment practices that may increase the risk of investment loss; can be highly illiquid; are not required to provide periodic pricing or valuation information to investors; may involve complex tax structures and delays in distributing important tax information; are not subject to the same regulatory requirements as mutual funds; and often charge high fees. Further, any number of conflicts of interest may exist in the context of the management and/or operation of any hedge fund.
Index definitions:
S&P 500 Index: market capitalization weighted index of the five hundred, largest, publicly traded companies in the United States
U.S. Large Cap: refers to US companies with a market capitalization of $10 billion or more, known for their size, stability, and inclusion in major stock indices.
EAFE: (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada.
EM: Emerging markets are countries or regions with economies that are in the process of rapid growth and industrialization but are not yet classified as developed markets.
ACWI: The All-Country World Index is a comprehensive global equity index that tracks the performance of large and mid-cap stocks from both developed and emerging markets, serving as a key benchmark for global investment strategies.
FX: Refers to foreign exchange rate.
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