Overview
Twice a year, we update our Long-Term Market Expectations (LTMEs) for major asset classes over a 10-year and 30-year investment horizon. Based on our building-block methodology (10-year) and risk premia methodology (30-year), these projections are the foundation of National Bank Investments’ strategic asset allocation (SAA) and portfolio construction.
For the current edition, this results in an anticipated annual return of 4.8% for a benchmark balanced portfolio over a 10-year investment horizon, which is lower than the realized return of 6.6% over the past 10 years. This forecast is also lower than the 5.9% we anticipated in the Fall 2024 update, with a slightly less favorable outlook for both stocks and bonds.
Our model now projects an annual return of 3.5% for the Canadian fixed-income universe over the next 10 years, with the forecast being pulled down by a lower Bank of Canada policy rate and lower starting bond yields relative to six months ago. On the equity side, the expected 10-year annual return of 4.8% for our equity benchmark² – a performance below the historical average – is mainly caused by elevated valuations, especially in the United States.
Ultimately, beyond the inevitable short-term fluctuations, expectations for a balanced portfolio remain largely positive for long-term investors, albeit slightly lower than the above-average returns achieved in recent years.