Market Outlook Dec 2018
A five-year returns forecast for major asset classes — updated twice a year to help you set strategic portfolio allocations.
Strategic outlook: Three possible scenarios. To calculate the five-year forecast, we consider three scenarios and calculate a weighted average based on the likelihood of each.
Most likely (50%): Return to trend. In this scenario the boost from tax cuts and fiscal stimulus fades away, monetary policy normalization continues and the U.S. fails to overcome demographic challenges and low productivity. These forces lower the level of economic growth in the U.S. back to trending levels.
Less likely (40%): Trade derails growth. In this scenario economic growth is derailed by uncertainty regarding trade conversations and difficult-to-forecast tariffs.
Least likely (10%): Business-friendly stimulus persists. In this scenario, the benefits of corporate tax cuts could improve productivity and increase the level of U.S. economic growth for a sustained period of time.