2026 Capital Market Assumptions for Major Asset Classes

Equity markets have extended their rally for a third straight year, but current valuations still point to compressed risk premia and more modest medium-term return potential. Our updated 5- to 10-year outlook suggests that a global 60/40 portfolio may deliver a real return of about 3.4%, which is better than the record low seen in 2021 but still below the long-run U.S. average.

This creates a market backdrop where selectivity matters more than broad beta exposure. Investors may need to lean harder on diversification, disciplined asset allocation, and realistic return assumptions as they plan for future goals.

The article also highlights currency risk as an important part of capital market assumptions. For globally invested portfolios, currency hedging can meaningfully affect outcomes, so it should be considered alongside expected returns and volatility when setting strategy.