A USD 15 trillion capital spending surge underpins J.P. Morgan Asset Management’s 2027 long-term capital assumptions, which project stronger growth and higher portfolio returns over the next 10 to 15 years. The firm raises its annual return forecast for a USD 60/40 stock-bond portfolio to 7.0%, while arguing that higher stock-bond correlations strengthen the case for diversification.
Key takeaways
- J.P. Morgan projects a 50% increase in total factor productivity by 2040.
- U.S. large-cap equities have a 7.5% return forecast, versus 7.1% for emerging markets.
- A 30% alternatives allocation lifts projected portfolio returns to 7.5%.
- Bitcoin receives its first return range but remains outside the main covariance matrices.
The 31st annual edition uses data as of September 2026. It links a stronger investment outlook to economic nationalism, faster technology adoption and changing capital flows, while projecting greater inflation volatility.
Capital spending and economic nationalism
J.P. Morgan expects the USD 15 trillion investment cycle to support economic growth and asset returns over its 10- to 15-year horizon. It sees productivity gains helping offset inflation pressures and an aging workforce.
Economic nationalism encourages domestic investment but also increases inflation volatility, the firm says. Rising domestic spending redirects public and private capital flows, making that shift another central force in its outlook.
David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, said: “The global economy is entering a powerful investment cycle, with AI adoption and rising productivity supporting a stronger growth outlook.”
AI productivity in the long-term capital assumptions
An investment surge centered on AI is projected to increase total factor productivity by 50%, to 120 basis points, by 2040. J.P. Morgan’s resulting forecasts put U.S. real GDP growth at 2.1% and developed-world nominal growth at 4.2%.
The firm describes this as its strongest developed-world growth outlook in 15 years, with the most favorable growth-inflation mix since the pandemic. AI adoption remains early and uneven, but broader diffusion and sustained investment underpin the projected productivity gains.
Asset returns and portfolio diversification
The long-term capital assumptions raise forecasts across equities, bonds and hedge funds, while adding a first estimate of bitcoin’s return range. The firm also projects higher risk-adjusted returns from a portfolio that includes diversified alternatives.
Equities, bonds and bitcoin
Profit margins above 15% help lift the U.S. large-cap equity forecast to 7.5%, up 80 basis points from 6.7%. Developed-market equity projections exceed emerging-market forecasts for the first time in the publication’s history. Global equities are projected to return 7.5% in USD, up from 7.0%, while emerging-market equities are forecast at 7.1%.
Higher real yields lift the global aggregate bond return forecast to 5.3%, versus 2.1% in 2021—the highest forecast in two decades. U.S. intermediate Treasuries are projected to return 4.6%, investment-grade credit 6.1% and high-yield credit 6.7%, up from 6.1%, with a fair-value spread of 440 basis points.
The firm estimates a bitcoin return range for the first time. Bitcoin is not included as a portfolio allocation or in its main covariance matrices.
Alternatives and real assets
Diversified hedge funds receive a 140-basis-point upgrade to 6.7%, supported by higher rates and sustained alpha trends. J.P. Morgan emphasizes manager selection. Private equity’s return assumption is 9.8%, with operational efficiencies, including AI use, among the opportunities identified.
Projected global real-asset returns are 8.1% for transportation, 7.9% for core real estate and 7.1% for infrastructure. U.S. core real estate is forecast at 8.1%; European core real estate rises from 6.9% to 7.1%. Broad commodities are projected at 4.8%, gold at 5.5% and timberland at 6.2%.
The 60/40 portfolio and alternatives
The balanced portfolio forecast rises 60 basis points to 7.0%. Allocating 30% to diversified alternatives lifts the projected return to 7.5% and the Sharpe ratio by 21% compared with a simple 60/40 portfolio.
More than 200 assets across more than 20 base currencies are included in the assumptions, which draw on insights from over 90 portfolio managers, economists and research analysts around the world.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.