Within this report, we present the DWS long-term capital market assumptions[1] as of the end of September 2020 for major asset classes.

The COVID-19 crisis sent the global economy into its deepest post-war recession. Because of the uncertainties that existed about the depth and duration of the crisis, DWS developed, back in March, three scenarios to assess its impact on long-run return forecasts. Given the increased clarity on the economic and fundamental outlook for financial markets—dividend cuts and credit default losses have reflected in market pricing—we, now, feel comfortable forecasting and presenting just 1 scenario for our 10-year return outlook.

The initial economic shock from the pandemic was quite severe but the recovery has also been swift. At the global level the economic output is expected to shrink by 4.4% this year and grow by 5.2% next year. In the US the loss of output is roughly comparable to that of the Global Financial Crisis (“GFC”). In Europe the impact is more severe but the output loss is likely to be smaller than during the financial and the subsequent Euro crisis. This in large part is because of the timely actions from central banks and national governments.

This rescue has come at a high cost, however, with its impact likely to be felt for years to come. Our models now suggest a return of 5% from the MSCI All Country World Index (“ACWI”) annually for the next decade, about half of what investors have received over the past decade[2]. A diversified portfolio of assets is now likely to return 4.2%, down 70 bps from the level at the end of the second-quarter and 150 bps from the level in March this year. Still, attractive opportunities exist within equities and alternative asset classes. Developed Market REITs and Global Infrastructure are expected to return 6.5% annually over the coming decade providing the necessary diversification and a favorable income stream to investors.

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1. Long-term forecasts are based on 10-year models and should not be compared with 12-month forecasts published in the DWS CIO View

2. MSCI ACWI generated an annualized 9.62% total return from 9/30/2010 to 9/30/2020


DWS Investment GmbH as of October 2020
I- 079229-1 (11/20)

CIO View