The OMFIF Podcast Navigating long-term investments amid short term volatility
May 28, 2025
Jonathan Griffiths, a Senior Investment Specialist at Capital Group, joins Arunima Sharan to discuss navigating long-term investments in a volatile market. They delve into the 2025 Capital Market Assumptions, highlighting opportunities in emerging markets and the changing landscape for fixed income strategies. The conversation covers the potential depreciation of the US dollar, the impact of AI on market trends, and the importance of scenario analysis amidst geopolitical shifts. The duo emphasizes adapting strategies while maintaining a long-term investment perspective.
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Long-term Return Expectations
- Capital Group's 2025 Capital Market Assumptions predict nominal returns over 20 years with lower but still attractive equity and bond returns.
- US equity returns lowered due to high valuations and concentration; fixed income returns reflect lower starting yields but remain appealing.
Building Capital Assumptions
- Use a building block approach combining multiple inputs like GDP growth, dividend yield, valuation, and currency for constructing capital market assumptions.
- Incorporate diverse analyst views and scenarios to better capture various potential investment outcomes.
Nuanced Valuation Approach
- The fair value CAPE with global linkages approach refines valuation impact by considering sustainable growth, interest rates, and international earnings exposure.
- For the US, this tempers standard mean reversion expectations significantly, suggesting less severe valuation corrections over 20 years.