The 21st century portfolio: Analyzing potential returns to the year 2100

Invesco’s Global Market Strategy Office lists out four key themes that should exert huge influences over potential investment returns.

Dec 6, 2019 | Paul Jackson and András Vig

We looked into the crystal ball to conduct analysis of potential investment returns to the year 2100. That has led us to consider four themes that we think will have a pervasive influence over the rest of the century: 

  • low bond yields;
  • demographics;
  • climate change, and;
  • technological innovation.

All four are interlinked, with feedback mechanisms from one to the other.

Given abnormally low yields, we expect fixed income returns to be lower than they have been during long periods of history. However, decelerating demographics and climate change suggest lower economic growth than we have been used to, which will also depress the returns on assets that rely on growth (equities, real estate and industrial commodities, say). On balance, we still expect higher returns on real estate and equities than on other assets and optimal portfolios are dominated by real estate, equities and cash.

We conclude that an optimal approach would have a core equity/real estate portfolio, with four thematic satellites: Africa, carbon reducing technology, carbon capture and labor replacing innovation.

Paul Jackson is Global Head of Asset Allocation Research for Invesco. András Vig is Multi-Asset Strategist for Invesco.

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