In many key economic regions, inflation and GDP growth is expected to remain subdued and below trend respectively, according to Hong-Kong based senior economist from asset manager Vanguard Qian Wang.
“That gives you a lower interest rate and if your cash rate is low, it means all the returns for the risky assets will be lower,” said Ms Wang.
For the global fixed income market, Ms Wang said Vanguard predicts a return between two to three per cent.
“We want to remind you that there are a lot of possibilities and there is still risk, but the median, the most likely scenario is the return for a global fixed income portfolio for the next few years will be two to three per cent, [so] lower than the historical average,” she said.
For the equity market, returns are expected to be around six to nine per cent, she said.
“So this seems to be our changing world, everything seems to be lower. But what is not changing is that higher returns always come with higher risk,” she said.
“The ultimate question for the investor in this environment is; in order to achieve a decent return target, similar to what you got before, are you willing to take on more risk?”