Time to Rebalance? Global Markets Offer Better Prospects Over US Stocks

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The total return outlook for the Global Market Index ticked lower in July, marking the first downshift in several months for this forecast. GMI’s long-term estimate now points to an annualized 7.0% performance, down slightly from theIn line with recent history, US equities are still the outlier for expected return relative to its history and the various asset classes that comprise GMI. The average forecast for American shares continues to print well below its trailing 10-year performance.

It’s likely that some, most or possibly all of the forecasts above will be wide of the mark in some degree. GMI’s projections, however, are expected to be somewhat more reliable vs. the estimates for its components. Predictions for the specific markets are subject to greater volatility and tracking error compared with aggregating the forecasts into the GMI estimate, a process that may reduce some of the errors through time.

The chart below compares GMI’s performance vs. the equivalent for US stocks and US bonds through last month. GMI’s current return for the past ten years is 7.1%, which is middling relative to recent history. * An estimate of the overall portfolio’s expected market price of risk, defined as the Sharpe ratio, which is the ratio of risk premia to volatility . Note: the “portfolio” here and throughout is defined as GMI* The expected correlation for each asset relative to the portfolio

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