Backdrop of Slower Growth Expected: Northern Trust Forecast

CHICAGO and LONDON, 7 September 2022Northern Trust’s Capital Market Assumptions (CMA) Report, a multi-asset class, five-year investment outlook updated annually, expects global private equity to lead five-year annualized returns at 9.6%. Global high yield and U.K. equities are expected to lead bond and stock returns, at 7.5% each.  Returns are expected to be within a global growth environment that slows to 2.6% annually.

Rooted in Northern Trust’s deep capital market analysis, the CMA Report informs the investment decisions and asset allocation recommendations made by the firm, which, as of June 30, 2022, had US$1.3 trillion in assets under management. Forecasts are created using Northern Trust’s “forward-looking, historically aware process,” where historical returns and relationships are subjected to the firm’s forward-looking themes that distinguish the CMA Report every year. This year’s Report includes six themes: 

  • Slow Growth Transitions: Newly affecting the global economy are the slow transitions, including pandemic to endemic; globalization to regionalization; and fossil fuels to renewables. They represent economic challenges for a global economy already facing debt and demographic headwinds. Those transitions will likely lead to continued slow growth.

“In our view, investors will see the past two years’ stimulus-boosted growth reverting to the previous slow form,” said Chris Shipley, Northern Trust Asset Management’s chief investment strategist for North America. “Our 1.9% U.S. forecast marks a slowdown from the past five years but is still ahead of most other advanced economies. On top of that, our 3.7% China forecast also marks a slowdown from the past five years.”

  • Inflation Recalibration: Automation and digitization are still impactful disinflationary forces, but can take time to overcome the recent shocks of stressed global supply chains, tight commodity markets and depressed labor supply. Recalibration will likely take much of the five-year horizon.

“While we expect inflation to take time to move back toward central banks’ targets, we do believe the worst has passed,” said Wouter Sturkenboom, Northern Trust Asset Management’s chief investment strategist for Europe, the Middle East, Africa, and the Asia-Pacific region. “The ‘Stuckflation’ regime is over, replaced by a period of recalibration back toward target levels which, for the U.S. and Europe stands at 3% and 2.6%, respectively.”

  • Monetary Drought: The firm predicts the post-Global Financial Crisis monetary flood has evaporated — and the next five years may bring much drier conditions. The past couple years of quasi-modern monetary theory policy — partially responsible for high inflation — will unlikely repeat soon.
  • Regional Rebuilding Blocs: Globalization is evolving into regional systems driven by security needs — both economic and military. While this economic deglobalization may move slowly, we think decisions on whether — or how best — to deglobalize portfolios will come more quickly.
  • Green Transition Still a Go: The rising costs and insecurity of energy supplies have led policymakers to prioritize meeting energy demand in the near term even if it means increasing carbon emissions. But, over the medium term, climate initiatives remain an important consideration.
  • Not So Negative: Higher interest rates – including a move out of negative territory for Europe and Japan – bring investors closer to positive real (after inflation) cash returns. Good for economic functioning (and savers), but a headwind for risk asset valuations.

“We believe that in the next five years investors can expect financial market returns to be modestly below long-term historical averages – per our ‘Slow Growth Transitions’ theme,” said Jim McDonald, Northern Trust’s chief investment strategist. The CMA Report notes, “the more exposed a country is to slow transitions and debt and demographic headwinds, the greater the economic pressure they’re likely to endure. This puts younger, resource-rich economies in better shape than older, energy-dependent economies.”

Developed markets equity returns are forecasted to range from 6.0% (U.S.) to 7.5% (U.K.). Interestingly, the report indicates returns will benefit from inflation, as sales (revenue) are driven by nominal, not real, growth rates. Likewise, the CMA report’s expectation of 5.8% for emerging market equity returns is driven by high potential revenue growth.

The CMA Report notes that with ‘Stuckflation,’ a theme the previous five years, moving to ‘Inflation Recalibration’ and inflation expectations more aligned with current market pricing, inflation-linked bond returns are expected to closely mirror Treasury returns of similar duration. Specific forecasts range from 3.4% and 3.5% on the high side (U.S. and Canada, respectively) to 0.1% on the low side (Japan). Europe (2.2%) and the U.K. (3.3%) fall within this range.

Within fixed income, CMA’s highest expected return is 7.5% for global high yield, for which better index quality, solid interest coverage ratios and reduced issuance are viewed as beneficial.  

Northern Trust predicts all real assets should do well in the five-year horizon, but finds natural resources particularly attractive given both near- and long-term commodity needs. The firm forecasts a 7.3% return for natural resources, 6.8% for global real estate and 6.0% for global listed infrastructure.

The full report, which outlines the firm’s long-term asset class return expectations and forecasts for the next five years, is available at

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 23 U.S. states and Washington, D.C., and across 23 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of June 30, 2022, Northern Trust had assets under custody/administration of US$13.7 trillion, and assets under management of US$1.3 trillion. For more than 130 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit us on Follow us on Twitter @NorthernTrust or Northern Trust Corporation on LinkedIn.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at

About Northern Trust Asset Management

Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments, so they can confidently realize their long-term objectives. Entrusted with US$1 trillion of investor assets as of June 30, 2022, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy. That’s why we combine robust capital markets research, expert portfolio construction and comprehensive risk management to craft innovative and efficient solutions that deliver targeted investment outcomes. As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect, and transparency.

Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Belvedere Advisors LLC, Northern Trust Asset Management Australia Pty Ltd and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.

Northern Trust is an Associate Advisor Member of TEXPERS. 


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