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* Unhedged Value
The Forecaster tool allows investors to select a combination of assets, currencies and time horizons of interest for comparison on a risk-return chart. These forecasts are produced by the Multi-Asset Solutions’ Research team at Aberdeen Standard Investments. These forecasts are updated semi-annually and are correct as of November 2020.
Return projections are estimates and provide no guarantee of future results.
For institutional, professional, qualified/wholesale investors only. Not for retail clients.
Our central view is that the economic environment for equities is likely to be benign. We assume a return to solid earnings growth as we exit the COVID-19 recession, but we expect the risk-free rates used to discount equity cash flows to remain near all-time lows. This justifies high valuation multiples and attractive returns, particularly for markets with the highest growth and for the UK and other regions which remain cheap. However, we think the probability of tail risks is significantly higher than in the past. If economic growth stagnates, or in the opposite case, where uncontained fiscal and monetary stimulus result in much higher inflation, equity returns would suffer severely. However, for now at least, the relatively low probability of these malign outcomes is more than offset by the higher probability of our more positive central scenarios.
* Unhedged Value
The cash-equity line serves to illustrate risk-adjusted relative performance. Assets above the line are expected to outperform a portfolio of equivalent risk containing only cash and equities; assets below are expected to underperform.