If 2025 was a watershed year, 2026 has demonstrated that the forces it set in motion are far from exhausted. Geopolitical tensions remain elevated, with conflict in the Middle East keeping energy prices high, while the shift towards a more fragmented, multipolar world continues to influence trade, defence spending and fiscal policy.
For long-term investors, one of the most significant developments has been the change in bond markets. Yields have risen broadly in 2026, reflecting persistent inflation, higher energy prices and growing concerns over government borrowing in many developed economies. Although this has made for another challenging year for bond investors, higher starting yields provide a stronger foundation for future returns. This improvement is reflected in our 2027 Capital Market Assumptions (CMAs).
Equity markets, meanwhile, have continued to deliver strong gains. However, higher valuations tend to weigh on future returns, and our long-term assumptions have moderated accordingly. As a result, the gap between expected equity and bond returns has narrowed, creating a more balanced but increasingly differentiated investment landscape across asset classes, regions and styles.
Higher interest rates are also reshaping the outlook for alternative investments. They provide a stronger return base for hedge funds and private credit, while increasing financing costs and placing greater emphasis on operational performance in private equity.
Against this backdrop, portfolio construction is becoming increasingly important. This year’s publication therefore introduces, for the first time, a dedicated chapter on asset allocation, translating our long-term assumptions into practical portfolio considerations.
We hope that this CMA document provides you with a framework to help you navigate and fulfil your long-term investment goals. Please do also refer to our Outlook 2027 to delve deeper into some of these enduring themes.
Download the full edition of our Capital Market Assumptions publication here.
Please also find a link to EFG’s Outlook 2027 here.