Northern Trust has released its 2025 Capital Market Assumptions (CMA) report, projecting moderate returns for global equities, improved performance in high-yield bonds, and continued strength in private credit.
The report highlights three key trends expected to shape global markets over the next decade: the rise of artificial intelligence (AI) in productivity, the ongoing energy transition, and the evolution of globalization. These themes underpin the firm’s long-term return expectations for stocks, bonds, real assets, and alternative investments.
Market Outlook and Return Projections
Angelo Manioudakis, global chief investment officer at Northern Trust Asset Management (NTAM), said investors will need to navigate an increasingly complex economic landscape in the coming years.
“As economic growth moderates, we believe investors will seek new drivers of growth,” Manioudakis said. “The adoption of AI, emerging energy sources, and shifts in global trade will lead to divergence in economic performance worldwide.”
Northern Trust’s long-term annualized return forecasts for major asset classes include:
- Equities: 7.5% for U.S. stocks, 5.8% for developed markets excluding the U.S., and 6.4% for emerging markets.
- Fixed Income: 4.7% for U.S. investment-grade bonds and 5.6% for U.S. high-yield bonds, with strong fundamentals supporting high-yield securities.
- Real Assets: 6.6% for global listed infrastructure, particularly in utilities, which may benefit from increased electricity demand due to AI.
- Alternatives: 8.4% for private credit and 10.1% for private equity, driven by AI advancements and potential merger and acquisition (M&A) activity.
AI, Energy Transition, and Globalization to Shape Markets
NTAM Chief Investment Officer of Global Asset Allocation Anwiti Bahuguna noted that equity returns are likely to moderate compared to recent years, while private investments could offer compelling opportunities.
“We anticipate credit spreads to widen but remain below the long-term average, supported by stable economic growth and solid credit fundamentals,” Bahuguna said. “Private investments could provide attractive returns relative to public equity and bond markets. Declining interest rates will likely drive demand for private credit, boosting M&A activity, while AI and other technological advancements will support double-digit growth in private equity and venture capital.”
The CMA report identifies three macroeconomic themes expected to influence markets over the next decade:
- AI-Enabled Productivity: Investments in AI are anticipated to enhance economic productivity, helping countries offset demographic challenges and improve growth.
- Navigating the Energy Transition: Rising global energy demand and the push for energy independence will require navigating evolving policies, technological advancements, and financing mechanisms.
- Globalization: Bent, Not Broken: While geopolitical tensions have reshaped trade and supply chains, globalization remains intact, presenting both risks and investment opportunities.
Strategic Insights for Investors
Northern Trust’s CMA serves as a foundation for its investment decisions and strategic asset allocation recommendations. The full report, including detailed 10-year asset class forecasts, is available on the company’s website.
