Sep 07, 2020 Equities

Looking to 2030: shares and infrastructure are the favourites

The coronavirus crisis has further shifted the weighting of individual asset classes‘ return prospects for the next decade. Equities and alternative investments look particularly likely to offer private investors relatively good earnings opportunities.

  • The coronavirus pandemic’s effect on companies is similar to what happened in the 2008/09 financial crisis. The DWS Research Institute therefore expects the long-term recovery to proceed in a similar way.
  • Dividend payments and profit growth should be the main drivers of equity returns by 2030.
  • Investment in infrastructure and listed companies that mainly invest in real estate also look worthwhile in the long term.
5 minutes to read

Coronavirus causes many symptoms, including fever and a dry cough. Figuratively speaking, the Sars-CoV-2 pathogen also induces forced myopia.

It is simply impossible to predict how quick and strong the economic recovery will be after the viral recession. How quickly will the tens of billions of taxpayers' and central-bank money that have been mobilised in coronavirus aid get the economy back on track? Will there be a second wave of infection with a further lockdown? And when will an effective vaccine become available? Many questions about the near future can currently not be answered seriously.

First the shock, then a surprisingly clear recovery

That notwithstanding, in June, DWS reassessed the expected returns to 2030 of leading assets as part of its long-term investment study the "DWS Long View". The most important interim conclusion from the experts at the DWS Research Institute was: "Dividend cuts, deterioration in companies' credit ratings and the government bond market shock were more extreme at the beginning of the coronavirus crisis than during the financial crisis of 2008/09. However, most companies‘ fundamental situation is nevertheless comparable with how it was in the aftermath of the financial crisis."

From a corporate point of view, the coronavirus crisis most closely resembles the 2008/09 financial crisis.

This means things don’t look quite as bad as they did in the first weeks of the lockdown. "By the third quarter, most developed economies should be back on track for growth," believes the DWS team. And many companies are benefiting from government aid, which was put in place much faster than in 2008/09 and is on a massive scale.

"Governments have prevented the coronavirus recession from turning into a depression to an unprecedented extent, " says the report. "This has enabled companies to secure liquidity and jobs. When the wheels started turning again, governments supported companies with stimulus packages that in many places accounted for up to 40 per cent of national value added."  

And with new bond purchases worth billions of euros, central banks were also quick and generous in coming to the economy’s aid. "This will add another 1,350 billion euros to the European Central Bank’s balance sheet," DWS estimates. "And the balance sheet of its US counterpart, the Fed, will also be twice as large at the end of 2020 as it was in January."

The bottom line is that the global economic recovery may be expected to take the form of a mathematical square root. It should move rapidly upwards from the low point but is then likely to flatten out on the path to the kind of growth that was usual pre-crisis.

Dividends and profits drive equity returns

What does this mean for equity markets‘ long-term prospects? After the first shock from the pandemic, which caused the S&P 500 headline US market index to plummet dramatically and the Dax German blue-chip index to fall 12 percent in just one week, most indices are now back at or just below their pre coronavirus crisis highs.

The DWS team believes that most companies‘ dividend power will return to normal over a period of five years from the coronavirus shock in spring 2020 - as happened after 2008/09. The strongest yield drivers for equities over the coming decade are expected to be rising dividend distributions and share buybacks, followed by real corporate earnings and share price increases resulting from both factors. Overall, DWS experts therefore calculate expected average annual returns over the next ten years of 5.5 percent for US shares, 4.6 percent for European shares and 5.9 percent for emerging-market shares. The forecast for Germany is 4.0 percent per year.

Even lower bond yields in the decade ahead[1]

As far as bonds are concerned, a massive increase in budget expenditure as a result of coronavirus aid, combined with central banks large-scale bond purchases, affects the ten-year perspective. Both these factors created additional demand in fixed-income markets. This caused yields to crumble further in the acute phase of the lockdown and is likely to dampen earnings prospects further on the road to 2030.

"For investors in US government bonds, for example, the next decade will probably bring low nominal and real interest rates," the DWS experts say. Negative yields in some "safe havens", such as German government bonds, are also likely to persist for some time.

Even corporate bond yields have come under pressure from coronavirus, while the aggressive economic slowdown has in parallel increased the risk of insolvency and thus the probability of default. Accordingly, DWS's earnings table for individual bond segments looks rather sobering. The DWS team estimates that by 2030, US government bonds will probably only yield 0.7 percent per year, while government bonds in Europe, including German Bunds, are likely to yield an average of minus 0.2 percent. According to the DWS forecast, only much riskier emerging-markets government bonds might will offer yields of around 5.6 percent per year.

Infrastructure assets benefit from stable revenues[1]

By contrast, DWS's long-term return estimates throw up more interesting prospects in alternative investments, including funds that invest in infrastructure projects such as telephone networks, roads and dams, or in listed real estate funds, known as REITs. These investments are helped by the fact that infrastructure operators‘ business models often generate crisis-proof income, which has a stabilising effect on stock market valuations. DWS’s analysis to 2030 shows an estimated total annual return of 6.2 percent per year for the likes of global infrastructure investments. According to DWS analysis, around half of this return comes from corporate income, with corporate growth the second most important driver.

In summary, shares or funds that invest in shares offer comparatively rewarding investment opportunities even on a ten-year horizon. The yield profile for many bonds, which was already meagre even before the coronavirus crisis, has deteriorated further. Meanwhile, infrastructure and listed property funds seem to offer a good risk/return profile.

When it comes to long-term yield prospects, bonds are predominantly losers.

Corona makes infrastructure and REITS the yield favourites[2]

Local Currency


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MSCI Emerging Markets


MSCI All Countries World Index


US Treasuries


US Corporates


US High Yield


Emerging Markets Sovereigns


Developed REITs


Global Infrastructure


Expected annual return until 2030 in local currency: Infrastructure investments and REITS are among the most promising asset classes in DWS's August 2020 long-term outlook. Equities also appear attractive. Bonds look to be the losers in the yield comparison. Source: DWS Investment GmbH, as of: 30/07/2020

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1. Forecasts are not a reliable indicator of future performance. Forecasts are based on assumptions, estimates, opinions and hypothetical models or analyses that may prove to be incorrect or inaccurate.

2. The risks for REITs and infrastructure lie in dividend cuts, but in the short term and on a more structural basis as a result of Covid-19 and related fundamental corporate issues.

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