J.P. Morgan Forecasts Higher Bond Returns Amid Inflation Risks

Global economic growth is expected to remain resilient over the next 10 to 15 years despite increasing trade restrictions, demographic pressures, and inflation volatility, according to J.P. Morgan Asset Management's 2026 Long-Term Capital Market Assumptions report. The 30th annual edition examines how changing economic policies, government investment, and technological developments could influence long-term investment returns across global financial markets.

J.P. Morgan Asset Management projects global economic growth of 2.5 percent, unchanged from its previous forecast. However, the report anticipates a narrowing growth differential between the United States and other developed economies, reflecting labor supply constraints, shifting trade policies, and increased government investment outside the United States.

According to the report, the US long-term growth forecast has been reduced from 2.0 percent to 1.8 percent, while the euro area forecast has increased from 1.4 percent to 1.5 percent. Emerging market growth is projected at 3.7 percent, compared with the previous estimate of 3.6 percent.

Inflation and Interest Rate Expectations

Inflation is expected to remain an important consideration for investors as governments expand spending commitments and businesses adjust to changing trade and labor conditions. J.P. Morgan Asset Management projects long-term US inflation of 2.5 percent, up from 2.4 percent in its previous assumptions, while developed market inflation is expected to average 2.3 percent.

According to the report, higher inflation volatility and concerns about government debt levels are contributing to expectations for higher bond yields and increased term-risk premiums. The firm's cycle-neutral forecast for the 10-year US Treasury yield has increased to 4.1 percent, while its expected annual return for the 10-year Treasury has risen to 4.6 percent.

J.P. Morgan Asset Management also projects annual returns of 5.2 percent for US investment-grade corporate bonds and 6.1 percent for US high-yield bonds. The report indicates that higher starting yields are supporting fixed-income return expectations despite relatively tight credit spreads.

The report also identifies a potential weakening of the US dollar over its forecast horizon. J.P. Morgan Asset Management estimates that the dollar remains approximately 10 percent overvalued on a trade-weighted basis, with changing global investment patterns and narrowing economic growth differences contributing to its outlook.

Equity Markets and Technology Investment

Global equity returns are expected to remain relatively stable despite elevated valuations following strong market performance in 2025. According to J.P. Morgan Asset Management, the projected annual return for global equities, measured by the MSCI All Country World Index, is 7.0 percent in US dollar terms, a decrease of 0.1 percentage points from the previous forecast.

The report projects annual returns of 6.7 percent for US large-cap equities and 7.8 percent for emerging market equities in US dollar terms. J.P. Morgan Asset Management attributes the continued support for equity returns to corporate profitability, investment spending, and the potential effects of technological adoption.

According to the report, artificial intelligence and other technologies are expected to influence corporate investment and productivity over the next decade. While technology providers are expected to benefit during the initial adoption phase, the broader deployment of these technologies could eventually generate cost savings and new revenue opportunities across other industries.

J.P. Morgan Asset Management also expects increased government spending and corporate capital investment to support economic activity. However, the report identifies potential risks associated with capital misallocation, rising public debt, and the possibility that investment spending could increase inflation without producing corresponding productivity gains.

Alternative Investments and Real Assets

The report projects varying returns across private markets and real assets, reflecting differences in market conditions, financing costs, and investment opportunities. J.P. Morgan Asset Management forecasts annual returns of 10.2 percent for its private equity composite, compared with 9.9 percent in the previous assumptions.

According to the report, expected annual returns for direct lending have declined from 8.2 percent to 7.7 percent, while venture capital returns are projected at 8.5 percent, down from 8.8 percent. The report also anticipates that increased capital flows into private markets could place pressure on the returns generated by the median investment manager.

Real estate return expectations vary by region, according to J.P. Morgan Asset Management. The firm projects annual returns of 8.2 percent for US core real estate, 6.9 percent for European core real estate, and 8.4 percent for Asia-Pacific core real estate. The report identifies starting yields, financing conditions, and inflation exposure as factors influencing these projections.

The report also forecasts annual returns of 6.5 percent for core global infrastructure, 7.9 percent for core global transportation assets, and 6.3 percent for global timberland. J.P. Morgan Asset Management projects gold returns of 5.5 percent annually, an increase from its previous estimate of 4.5 percent, reflecting expectations for continued inflation volatility and demand from investors and central banks.

Portfolio Diversification and Long-Term Risks

J.P. Morgan Asset Management maintains its projected annual return of 6.4 percent for a traditional global portfolio consisting of 60 percent equities and 40 percent bonds. The report indicates that stronger bond return expectations have offset modest changes in equity projections.

According to the report, a portfolio incorporating a 30 percent allocation to diversified alternative investments is projected to generate an annual return of 6.9 percent. The firm also estimates that this allocation could improve the portfolio's Sharpe ratio, a measure of risk-adjusted returns, by approximately 25 percent compared with the traditional 60/40 portfolio.

The report identifies several structural risks that could affect long-term economic growth and investment returns, including escalating geopolitical conflicts, renewed trade tensions between the United States and China, government debt stress, major cyber attacks affecting financial markets or critical infrastructure, and additional restrictions on migration.

J.P. Morgan Asset Management also identifies potential upside scenarios, including accelerated productivity growth, wider adoption of renewable energy, medical advances that extend working lives, and technological breakthroughs that reduce costs across major industries.

According to the report, long-term portfolio construction will need to account for inflation and interest rate shocks alongside traditional economic growth risks. The firm's projections indicate that changes in government policy, corporate investment, and technology deployment could alter the relative performance of asset classes over the coming 10 to 15 years.

Source: J.P. Morgan Asset Management, 2026 Long-Term Capital Market Assumptions, 30th Annual Edition. Return figures represent long-term projections rather than guaranteed outcomes. The report's principal estimates are generally as of September 30, 2025.