Voya Investment Management (Voya IM), the asset management business of Voya Financial, Inc. (NYSE: VOYA), today issued its annual Capital Markets Assumptions report for 2024. The report provides market forecasts for the coming decade while considering longer-term trends in economic and financial factors that are likely to drive asset class return and risk. Among the key insights are:

• The next decade will likely be characterized by returns below historical averages across all major asset classes.
• Voya IM’s base case forecasts 1.6% U.S. GDP growth through 2033, driven by below trend productivity growth and subdued labor force growth.
• Developed market equities are likely to deliver mid-single digit returns, with U.S. markets higher than most comparable non-U.S. ones.
• Bond return assumptions have increased from last year and are at the highest in a decade, showing material value in fixed income — this includes high yield, which is anticipated to be competitive with equities in terms of investment returns.
• Investment return forecasts are generally above inflation. If expectations prove broadly correct, asset allocators will find numerous opportunities to generate alpha across and within asset classes.
• While the U.S. will be constrained by labor force growth, it can move to a somewhat higher sustained growth path than it experienced in the previous business cycle. The key is to exit the current low productivity regime that has constrained the U.S. economy.

“This exercise is an opportunity for us to step back from the day-to-day noise within the markets and consider longer-term trends in economic and financial factors,” said Barbara Reinhard, chief investment officer, MASS. “Given higher valuations and lower risk premiums in equity markets, our analysis for the next decade paints a picture of relatively low expected returns for equities. In contrast, our outlook for bonds has improved, owing to higher starting bond yields compared with the depressed levels of 2022.”

The analysis, conducted by Voya IM’s Multi-Asset Strategies and Solutions (MASS) team, looked at numerous macroeconomic and financial data as part of its review and forecasts, including the impact of labor force participation rate expectations on potential gross domestic product (GDP), the likelihood that profit margins will mean-revert, and the outlook for long-run trends in productivity.

Voya IM’s forecasts were informed by historically low potential GDP growth, reduced labor supply and elevated inflation. Furthermore, in response to client demand and following guidance from organizations such as the Task Force on Climate-Related Financial Disclosures (TCFD), climate scenarios were integrated into Voya IM’s economic forecasts this year.

About Voya Investment Management

Voya Investment Management manages approximately $312 billion as of September 30, 2023 in assets across public and private fixed income, equities, multi-asset solutions and alternative strategies for institutions, financial intermediaries and individual investors, Voya is one of the 50 largest asset managers globally, and draws upon a 50-year legacy of active investing and the expertise of 300+ investment professionals. Voya IM has cultivated a culture grounded in a commitment to understanding and anticipating clients’ needs, producing strong investment performance, and embedding diversity, equity and inclusion in its business.

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