We expect higher fixed income and real asset returns alongside lower U.S. equity returns for the next decade.
KEY TAKEAWAYS
- Our 10-year Capital Market Assumptions reflect higher yields relative to the previous 10 years, stubbornly higher inflation, slower real growth, and higher volatility.
- Fixed income, driven by the higher current starting point of yields, is expected to have significantly higher annualized returns than the prior 10 years, while U.S. equity returns are expected to be lower given less supportive valuations.
- We believe real assets are well positioned for stronger annualized returns over the next 10 years amid a more inflationary environment, supportive valuations, and a period of undersupply.
Our capital market assumptions for the next ten years reflect that the past two years have ushered in a generational change for markets.
Gone are near-zero interest rates, low inflation, stable growth and long economic cycles that were observed for well over a decade.
Taking their place: higher and more normal yields, increased economic volatility, risks of inflationary surprises, greater geopolitical uncertainty and a resetting of asset prices. Indeed, the post-GFC low/ zero interest rate world appears to be far in the rearview mirror.
The landscape we envisioned for the next decade when we released our inaugural capital market assumptions last year—one characterized by slower economic growth alongside higher and more volatile inflation—remains largely in place. As is typically the case when long-term projections are updated, there have not been major shifts in our return expectations across asset markets.
At this time last year, few market observers predicted the resilience of the U.S. economy or such high yields. Perhaps most significantly, inflation has also proven stickier—an indication, we believe, of what to anticipate in coming years.
Now, after two years of aggressive central bank actions intended to tame inflation, we believe the rate-hiking cycle is likely ending. To be sure, market expectations on central bank policy have shifted significantly from the start of 2024 to the time of this writing. Regardless of the timing or number of rate cuts, the bottom line is that we are very unlikely to return to previous levels of accommodation.
Echoing our view from last year, we believe that fixed income now provides a higher-return alternative to other asset classes than was the case for most of the previous decade. Equity returns, by comparison, are expected to be lower, facing elevated valuations, slower growth and a higher cost of capital.
We believe this environment is favorable for real assets. The starting point on valuations is more attractive. And, whereas forecasters have consistently been too optimistic about inflation falling, we expect stickier inflation going forward (Exhibit 1), driven by factors including commodity underinvestment, tight labor markets, geopolitics and deglobalization.
Investors today also face a much more difficult return environment. Diversifying beyond stocks and bonds with real assets is likely to become increasingly important in creating more efficient portfolios.
Macroeconomics

We expect real gross domestic product (GDP) growth in the United States to average 1.6% annually and global GDP growth to average 3.1% annually. While growth has so far proven resilient to higher rates, we expect it to slow. At the same time, the world has moved away from peak globalization, relative geopolitical stability, quantitative easing and central bank accommodation, which will result in prolonged higher-trend inflation as well as greater macroeconomic volatility.
Fixed income

Fixed income has entered a new return cycle in which rising rates have made assets increasingly attractive. One indication: Our assumptions for U.S. Treasuries call for an expected annual return of 3.9% (unchanged from last year) over the next 10 years. That compares with just 1.7% annualized in the past 10 years.
Equities

U.S. equities had a remarkable 26.3% return in 2023, raising valuations further and causing us to reduce our 10-year assumptions to 7.0% (from 7.3% in last year’s CMA). While non-U.S. markets have consistently lagged U.S. returns in recent years, we expect total returns to be on par with the U.S. going forward, given a more attractive valuation starting point but lower levels of profitability and slower earnings growth.
Real assets

We believe real assets—in particular, natural resource equities and infrastructure— are well positioned in a more inflationary environment. Commodities, we believe, will see a substantial improvement in returns amid undersupply and higher production costs. The lead/lag relationship between listed and private real estate—in which listed leads private in both selloffs and recoveries—is evident in the adjustment we have made from our 2023 assumptions, with a modest decrease in listed real estate expected returns (after an 11.4% return in 2023) and a slight increase in expected private real estate returns (as the market continues to find a bottom).
EXHIBIT 1
Inflation expected to stay above pre-pandemic trend

As of 12/31/2023. Source: Bloomberg, Cohen & Steers.
In 2023, we released the first edition of our annual capital market assumptions—our view of the outlook for macroeconomic and financial market conditions for the next 10 years. This process is intended to help inform investment decisions over a strategic time horizon, accounting for the economic backdrop as well as the starting point for asset prices and valuations.
In the sections below, we detail assumptions for the expected returns of the various asset classes we analyze.
Fixed income
The new regime of higher rates and higher-trend inflation has mixed implications for fixed income returns. The good news for Treasury investors is that the rise in interest rates in 2022 and 2023 means that capital losses are likely behind us, and higher current yields are expected to generate good returns (3.9%) over the next decade.
That’s a significant difference from the previous regime (spanning 2012–2021), when there were only three months in which 10-year U.S. Treasuries closed with a yield in excess of 3%. Following the growth and inflation rebound in the post-Covid era, alongside aggressive Fed (and other global central bank) tightening, short-term rates have shifted higher, even brushing up against 5% in 2023.
While a higher-for-longer cyclical environment has dominated market attention of late, we believe neutral real rates are slightly lower than current levels, suggesting Fed easing is probable in coming years. Regardless of any view on the timing and number of rate changes, the key assumption is that we do not expect a decline in rates back to pre-Covid levels. Indeed, our base case anticipates a terminal fed funds rate of around 3% over the next 10 years.
The starting point for corporate credit markets is also relatively attractive from a yield perspective. Our return forecasts for investment grade and high yield are roughly unchanged from last year, and these markets appear poised to outperform Treasuries. However, it is worth noting that the starting point on spreads poses some shorter-term risks in a slower-growth environment, which could lead to spread widening and, ultimately, a cyclical uptick in defaults.
Preferred securities had a strong year in 2023, returning 8.2% despite the well- publicized banking sector turmoil in the first quarter. Looking ahead, we see good reasons to remain optimistic about preferreds’ return potential, including strong fundamentals, attractive valuations and the end of the rate-hiking cycle.
3.9%
Expected 10-year annualized returns for U.S. Treasuries
EXHIBIT 2
Higher yields driving improved expectations for fixed income
Expected annual returns vs. prior-decade annual returns

As of 12/31/2023. Source: Refinitiv Datastream, Bloomberg, Cohen & Steers.
Past performance is not a guarantee of future results. Forecasts are inherently limited. There is no guarantee that any market forecast will be realized.
Equities
Global equity markets face several crosscurrents in the years ahead. On one hand, strong nominal growth—courtesy of real growth and somewhat higher inflation—should support top-line growth, particularly in the U.S., even if some margin compression is possible from currently elevated levels.
However, the starting point for valuations is less supportive in a higher–yield interest rate regime and given 2023’s strong performance, more than half of which is attributable to multiple expansion. Combined, this suggests U.S. equity returns of 7.0% over the next decade—down slightly from our 2023 assumption of 7.3%, and far lower than the prior 10 years’ annualized returns of 12.0%.
Non-U.S. markets have somewhat different drivers. For developed international equities, we anticipate slower-trend earnings growth (compared with the U.S.) due to declines in working-age population growth and relatively lower productivity. However, these markets have higher dividend yields and more attractive valuation starting points to support returns.
Therefore, we expect developed international equities’ total returns to be on par with the U.S. That’s in contrast to the prior 10 years, when U.S. equity returns were much higher (Exhibit 3).
Despite persistent underperformance, we believe emerging markets will continue to lag in coming years, given a continuation of structurally lower return on equity and potential headwinds to growth in China.
7.0%
Expected 10-year annualized returns for U.S. equities
EXHIBIT 3
Expected U.S. equity returns no longer exceptional

As of 12/31/2023. Source: Refinitiv Datastream, Bloomberg, Cohen & Steers.
Past performance is not a guarantee of future results. Forecasts are inherently limited. There is no guarantee that any market forecast will be realized.
Real assets
We see a favorable backdrop for real assets, supported by several key pillars (including stickier inflation and improved diversification of traditional portfolios). Moreover, we continue to believe that real assets valuations are attractive. Even without relying on multiple expansion, real assets should be able to post strong returns driven by growth and profitability.
Further, the world has transformed from an era of abundance marked by lower wages, commodity overinvestment, low inflation and relative geopolitical stability, among other factors. We are now in a regime characterized by “scarcity,” with higher inflation, higher wage price pressures, a move away from peak globalization and more geopolitical uncertainty. This is a backdrop that is likely to support higher real assets prices (Exhibit 4).
EXHIBIT 4
A macroeconomic regime shift is in progress

As of 03/31/24. Based on Cohen & Steers’ views and expectations.
The views and opinions are as of the date of publication and are subject to change without notice. There is no guarantee that any market forecast set forth in this presentation will be realized.
For U.S. listed REITs, we expect annualized returns of 8.0% over the next 10 years—only marginally lower than our forecast last year. Global listed REITs are expected to be similar (8.1%) given a slightly higher dividend yield and better valuations after lagging returns in 2023.
Listed and (core) private real estate returns tend to be similar over the long run, reflecting the similar nature of the asset classes. However, the substantial decline in listed markets in 2022 stood in sharp contrast to private markets, which actually posted positive returns given the lagged nature of asset valuations in reported results.
During 2023, these trends reversed, with listed markets rising—particularly in the fourth quarter—while private market returns were negative. As a result, going forward, we expect somewhat higher returns in private markets (7.3%) than was the case last year. Expected total returns for global listed infrastructure also appear attractive at 7.8%.
We expect commodity prices to be supported by the secular backdrop—this includes underinvestment in supply in recent years, investment in energy transition, and global geopolitics. For commodity returns, a higher level of interest rates also boosts the expected return on collateral, offset slightly by some drag from the roll yield.
Strong natural resource equity returns (8.8% over the next decade) should be supported by commodity prices, as well as by low current valuations and very high free cash flow growth.
EXHIBIT 5
New regime portends stronger real assets returns
Expected annual returns vs. prior-decade annual returns

As of 12/31/2023. Source: Refinitiv Datastream, Bloomberg, Cohen & Steers.
Full 10-year capital market assumptions detail
Expected annual returns vs. prior-decade annual returns

Past performance is not a guarantee of future results. Forecasts are inherently limited. There is no guarantee that any market forecast will be realized. (1) 2014–2023 performance (1/1/2014–12/31/2023) represented by the following: Fixed income: Cash: Bloomberg Barclays U.S. Long Government/Credit Index. TIPS: U.S. Treasury Inflation Notes Index. Treasuries: Bloomberg Barclays U.S. Treasury 7-10 Year Index. Corporate bonds: Bloomberg Barclays U.S. Aggregate Corporate Index. High yield bonds: Bloomberg Barclays U.S. Corporate Investment Grade Index. Preferred securities: ICE BofA Fixed Rate Preferred Securities Index. Long-term Treasury: Bloomberg Barclays U.S. Treasury Long Bond Index. Long-term corporate: Bloomberg Barclays U.S. Long Treasury Index. U.S. equities: S&P 500 Total Return Index. Global equities: MSCI ACWI Total Return. EAFE: MSCI EAFE Total Return Index. Emerging markets: MSCI Emerging Markets Total Return Index. Real assets: U.S. REIT: FTSE Nareit Equity REITs Index. Global REIT: FTSE EPRA Nareit Developed Real Estate Index. Infrastructure: UBS Global 50/50 Infrastructure & Utilities Index (net) through March 31, 2015, and the FTSE Global Core Infrastructure 50/50 Net Tax Index for periods thereafter. Natural resource equities: S&P Global Natural Resource Equities Index. Commodities: Bloomberg Commodity Total Return Index. Private real estate: NCREIF ODCE Index. Volatility is represented by standard deviation, which is a statistical measure of the historical volatility of a returns; the higher the number the greater the risk.
Expected asset class correlations in detail

Forecasts are inherently limited. There is no guarantee that any market forecast will be realized. Correlation coefficients are based on monthly data and measure the degree to which the returns of two assets move together. Correlations vary from -1.0 (perfect inverse relationship) to 1.0 (perfect synchronization).
FURTHER READING

A next-generation approach to natural resource equity investing
A proven framework provides a superior starting point for reducing volatility without sacrificing returns.

Why active management matters for listed real estate
Active managers of listed real estate funds have historically outperformed passive. We believe this is due to the inefficiency, diversity and complexity of listed real estate markets.

3 Reasons to own real assets today
A diversified blend of real assets can potentially play a vital role in the new regime of higher inflation, higher rates and increased market volatility.
IMPORTANT: The capital market assumptions regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. The expectations and other information are for educational and illustrative purposes only. Hypothetical performance has inherent risks and limitations, and prospective investors should not place undue reliance on any such information. Because of Cohen & Steers’ investment focus on real assets, Cohen & Steers will benefit from increased interest in these asset classes, and you should keep this conflict in mind when evaluating the capital market assumptions. Other investments may have characteristics similar or superior to real assets.
Additionally, Cohen & Steers may make investment decisions that are inconsistent with the capital market assumptions or any views expressed herein. Cohen & Steers may also develop and publish material that is independent of, and different than, the capital market assumptions or any views expressed herein.
The intent of the capital market assumptions is not to predict or project future returns of any investment, asset class or portfolio. Instead, the purpose of the capital market assumptions is to express Cohen & Steers’ view of expected general asset class returns of the period shown, which may be incorrect, potentially materially so, and are subject to change without notice.
By receiving this communication, you agree with and acknowledge the limitations of the capital market assumptions, the associated conflicts and the restrictions on use described herein.
The information presented is provided as educational and is not intended to be (and should not be) relied upon as a recommendation to invest in any specific security or asset class or to adopt any investment strategy, or as the primary basis for any investment decisions. Prior to making a decision to invest in any security or asset class, you should consult with your financial professional to determine whether the decision is appropriate for you. Return, yield and volatility expectations are based on Cohen & Steers’ analysis, are not a guarantee of future performance, and do not represent the past or projected performance of any fund, investor or other account managed by Cohen & Steers.
The assumptions used to form the basis for the information presented are as of the date shown and are subject to change. Projected returns, yield, volatility and liquidity are subject to many factors that are uncertain and outside the control of Cohen & Steers, and analysis may be subject to error. Projected outcomes depend on economic events, which (even if they occur) could result in outcomes that could be materially higher or lower than expected. The performance expectations displayed represent the midpoint possible expectations within a broader range of possible outcomes, some of which are negative. Actual outcomes could be materially lower than the central expectations.
An investor cannot invest directly in an index, and index performance does not reflect the deduction of any fees, expenses or taxes. Index comparisons have limitations, as volatility and other characteristics may differ from a particular investment. There can be no assurance that any trends or correlations shown herein will continue in the future.
The information presented is not being provided in a fiduciary capacity and does not account for the age, other investments, financial situation, tax status, investment objectives, investment experience, investment time horizon, liquidity needs or risk tolerance of any investor. We believe the information to be accurate, but we do not represent that it is complete or should be relied upon as the sole source of appropriateness for determining any investment strategy. Cohen & Steers does not provide investment, tax or legal advice and will not advise you on your investment decisions. Investors should consult with their investment, tax or legal professional regarding their individual circumstances prior to making any investment decisions.
Criteria and Methodology
Inputs to these expectations include return, volatility and correlation across asset classes. Assumptions are generally not updated on a real-time basis; therefore, results may vary with each use and over time. All such expectations are subject to change. Yields on all markets are based on levels derived at year-end 2023.
Expectations for returns are driven by a range of factors. Within fixed income, forecasts for interest rates are determined at various maturities based on economic growth, inflation, and policy expectations as well as factors such as the shape of the yield curve, the expected level of real interest rates and inflation breakevens, and credit spreads. These interest rates are used to compute expectations for total returns, accounting for the starting point of bond yields, capital gain/loss based on assumption of benchmark duration, and yield. Treasury bond returns are based on expectations for the level of inflation, the path of future short-term rates, and an expectation for the slope of the yield curve. Credit returns, including corporate, high yield and preferreds, are based on expectations for fair value spread levels along with adjustments for historical downgrade and default risk through an economic cycle.
For equities, including listed real assets, various factors contribute to total return expectations. Expectations are based on estimates for earnings growth and fair value multiples. Earnings growth expectations are driven by anticipated profitability and payout ratios, while valuation multiples are based on expected interest rates, risk premiums and growth rates. Changes in valuations are driven by forecasts of interest rates, risk premiums, growth and profitability. Dividend yield also contributes to total return.
For commodities, we forecast investable returns on commodity total returns by coming up with expectations on index-level spot returns, roll returns and collateral returns. Spot returns are a function of inflation and expectations for supply/demand/inventory balances, roll returns are a function of the typical shape of the commodity futures curve, and collateral returns are a function of our forecast for short-term interest rates.
Volatility assumptions are driven by historical experience as well as expectations for changes related to growth, inflation, policy, etc. Volatility for private real estate is adjusted (per academic work by Geltner) to more accurately reflect economic volatility, correcting for the autocorrelation/smoothing that exists in private RE returns. Correlations reflect historical correlations.
Forward-looking volatility and correlation assumptions are based on historical outcomes. Volatility data use the full available data history available for each respective market. Correlation data use a common starting point. Future economic and market conditions could result in different experiences in coming years.
Due to the illiquid nature of private real estate, private real estate returns generally exhibit a pattern that understates the level of volatility that would be realized if assets were valued more frequently. We used a statistical adjustment (Geltner, David. 1993. “Estimating Market Values from Appraised Values without Assuming an Efficient Market”) to adjust for the first-order autocorrelation in the appraisal-based private real estate return series to arrive at an estimate that more accurately reflects the true volatility of private real estate returns for the time periods shown. This adjustment is also applied to calculations of private real estate correlation to other asset classes. Estimates are inherently uncertain and may not reflect actual outcomes. Utilizing different factors or assumptions in conducting the statistical analysis may result in materially different estimates than those shown. Investing in private real estate involves substantial risk, including the entire loss of an investment.
Certain inputs into the capital market assumptions have been obtained from sources that Cohen & Steers believes to be reliable as of the date presented; however, Cohen & Steers cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content herein and inputs into the capital market assumptions are current as of the date of publication (or such earlier date as referenced herein) and are subject to change without notice. Cohen & Steers does not make any express or implied warranties or representations as to the inputs into the capital market assumptions or the completeness or accuracy of its results.
Risks of investing:
Risks of equity investing. Common stocks are subject to special risks. Although common stocks have historically generated higher average returns than fixed income securities over the long term, common stocks also have experienced significantly more volatility in returns. Common stocks may be more susceptible to adverse changes in market value due to issuer-specific events or general movements in the equities markets. Common stock prices fluctuate for many reasons, including changes to investors’ perceptions of the financial condition of an issuer or the general condition of the relevant stock market, as well as the occurrence of political or economic events affecting issuers.
Risks of investing in fixed income securities. Fixed income securities are subject to the ability of an issuer to make timely principal and interest payments, changes in interest rates, the creditworthiness of the issuer, and general market liquidity.
In a rising interest rate environment, bond prices may fall, and this may result in periods of volatility and increased portfolio redemptions. In a declining interest rate environment, fixed income securities may generate less income. Longer-term securities may be more sensitive to interest rate changes. High yield securities (“junk bonds”) are lower-rated securities that may have a higher degree of credit and liquidity risk. U.S. Treasury securities are backed by the full faith and credit of the U.S. government as to payment of principal and interest.
Risks of investing in real estate securities. The risks of investing in real estate securities are similar to those associated with direct investments in real estate, including falling property values due to increasing vacancies or declining rents resulting from economic, legal, political or technological developments; lack of liquidity; limited diversification; and sensitivity to certain economic factors such as interest rate changes and market recessions.
Risks of investing in global infrastructure securities. Infrastructure issuers may be subject to regulation by various governmental authorities and may also be affected by governmental regulation of rates charged to customers; operational or other mishaps; tariffs; and changes in tax laws, regulatory policies and accounting standards.
Risks of investing in foreign securities. Foreign securities involve special risks, including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. Some international securities may represent small- and medium-sized companies, which may be more susceptible to price volatility and may be less liquid than larger companies.
Risks of investing in the energy sector. A downturn in the energy sector of the economy could have a larger impact on a strategy concentrated in the energy sector than on a strategy that does not concentrate in the sector. In addition, there are several specific risks associated with investments in the energy sector, including commodity price risk, depletion risk, supply and demand risk, interest rate transaction risk, affiliated party risk, limited partner risk, and risks of subordinated MLP units. MLPs that invest in the energy industry are highly volatile due to significant fluctuation in the prices of energy commodities as well as political and regulatory developments.
Risks of investing in commodities. An investment in commodity-linked derivative instruments may be subject to greater volatility than investments in traditional securities, particularly if the instruments involve leverage. The value of commodity- linked derivative instruments may be affected by changes in overall market movements, commodity index volatility, changes in interest rates, or factors affecting a particular industry or commodity, such as drought, floods, weather, livestock disease, embargoes, tariffs and international economic, political and regulatory developments. The use of derivatives presents risks different from, and possibly greater than, the risks associated with investing directly in traditional securities. Among the risks
presented are market risk, credit risk, counterparty risk, leverage risk and liquidity risk. The use of derivatives can lead to losses because of adverse movements in the price or value of the underlying asset, index or rate, which may be magnified by certain features of the derivatives. No representation or warranty is made as to the efficacy of any particular strategy or fund or the actual returns that may be achieved. Futures trading is volatile and highly leveraged, and it may be illiquid. Investments in commodity futures contracts and options on commodity futures contracts have a high degree of price variability and are subject to rapid and substantial price changes. Such investments could incur significant losses. There can be no assurance that the options strategy will be successful. The use of options on commodity futures contracts is to enhance risk-adjusted total returns. The use of options, however, may not provide any, or may provide only partial, protection from market declines. The return performance of the commodity futures contracts may not parallel the performance of the commodities or indexes that serve as the basis for the options it buys or sells; this basis risk may reduce overall returns.
Risks of investing in natural resource equities. The market value of securities of natural resource companies may be affected by numerous factors, including events occurring in nature, inflationary pressures and international politics. If a strategy invests significantly in natural resource companies, there is the risk that the strategy will perform poorly during a downturn in the natural resource sector.
Risks of investing in preferred securities. Investing in any market exposes investors to risks. In general, the risks of investing in preferred securities are similar to those of investing in bonds, including credit risk and interest rate risk. As nearly all preferred securities have issuer call options, call risk and reinvestment risk are also important considerations. In addition, investors face equity-like risks, such as deferral or omission of distributions, subordination to bonds and other more senior debt, and higher corporate governance risks with limited voting rights. Risks associated with preferred securities differ from risks inherent with other investments. In particular, in the event of bankruptcy, a company’s preferred securities are senior to common stock but subordinated to all other types of corporate debt. It is important to note that corporate bonds sit higher in the capital structure than preferred securities and therefore, in the event of bankruptcy, will be senior to the preferred securities. Municipal bonds are issued and backed by state and local governments and their agencies, and the interest from municipal securities is often free from both state and local income taxes. Treasury securities are issued by the U.S. government and are generally considered the safest of all bonds since they are backed by the full faith and credit of the U.S. government as to timely payment of principal and interest. Preferred securities may be rated below investment grade or may be unrated. Below-investment-grade securities or equivalent unrated securities generally involve greater volatility of price and risk of loss of income and principal, and they may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher-grade securities.
Cohen & Steers Capital Management, Inc. (Cohen & Steers) is a U.S. registered investment advisory firm that provides investment management services to corporate retirement, public and union retirement plans, endowments, foundations and mutual funds. Cohen & Steers U.K. Ltd. is authorized and regulated by the Financial Conduct Authority of the United Kingdom (FRN 458459). Cohen & Steers Asia Ltd. is authorized and registered with the Hong Kong Securities and Futures Commission (ALZ367). Cohen & Steers Japan Ltd. is a registered financial instruments operator (investment advisory and agency business and discretionary investment management business with the Financial Services Agency of Japan and the Kanto Local Finance Bureau No. 3157) and is a member of the Japan Investment Advisers Association. Cohen & Steers Ireland Ltd. is regulated by the Central Bank of Ireland (No.C188319). Cohen & Steers U.S. registered open-end funds are distributed by Cohen & Steers Securities, LLC and are only available to U.S. residents.