J.P. Morgan CEO Jamie Dimon. (Photo: AP)

The outlook of this year’s Long-Term Capital Market Assumptions from J.P. Morgan: “Secular optimism, cyclical realism.”

J.P. Morgan’s research shows that while cyclical factors continue to constrain traditional 60/40 portfolios, stabilizing secular growth gives investors reason for cautious optimism – and incentive to turn off auto-pilot – to seize opportunities across the full spectrum of asset classes and investment strategies.

This year, expected return for a U.S. dollar-based 60/40 portfolio is slightly lower at 5.25%, down from 5.50% last year.

J.P. Morgan’s 2018 trend real GDP growth estimates of 1.5% in developed markets and 4.5% in emerging markets are unchanged from last year. However, beneath this stable outlook is evidence that the prolonged series of downgrades to trend growth, reflecting population aging, may be nearing an end.

“Real growth will run at a modest pace by long-term historical standards, with aging populations representing the most important source of slowing relative to the past,” according to the research.

The research also sees potential for a technology-driven boost to productivity, which creates an upside risk to our forecasts.

“Technology will affect economic growth rates and capital market returns in ways that are difficult to foresee,” the research states. “Some upside risks to long-term growth are emerging as technology has scope to lift productivity.”

Despite cautious optimism on secular growth trends, cyclical factors still constrain asset returns, according to the assumptions.

The Long-Term Capital Market Assumptions, now in its 22nd year, are developed as part of a deep, proprietary research process that draws on quantitative and qualitative inputs as well as insights from a team of more than 30 experts across J.P. Morgan Asset Management.

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