Since our last publication in November 2023, the economic environment has stabilised with inflation falling quite sharply.

Guy Ertz, Deputy Chief Investment Officer, presents his report with a contextualised update of long-term expected returns for each asset class.

Bond yields have stabilised at around 3% in the eurozone and 4.25% in the US. Bond yield spreads for Corporate bonds especially high yield bonds have continued to fall and are now well below historical averages. That has led us to revise downwards the long-term expected return on high yield bonds by -0.5% to 5.25% in Europe and to 6% in the US. The other bond market expected return estimates remain unchanged.

Stock markets have performed very well since November last year and are becoming expensive. Indeed, dividend yields have fallen, and price-to-earnings ratios have risen. However, the risk appetite is picking up and stock buy-back programmes should be supportive in the coming years. The expected returns are mostly unchanged except for the US and Japan, with a small upward revision.

No change for other asset classes.

Deputy Chief Investment Officer

BNP Paribas Wealth Management