2023 Long-Term Capital Market Assumptions – Q3 Update

• Markets have outperformed expectations heading into this year, with equities rebounding significantly (quality inside the US and value outside of the US being the two dominant factors) from the lows of 2022 and credit outpacing government bonds.
• September and the most recent Federal Reserve (Fed) meeting dashed some of this wishful thinking. With interest rates steepening past prior critical levels, namely the 10-year Treasury rate above 4.5%, and expectations for the federal funds rate to remain near 4% until year-end of 2025, there may be further challenges as the long and variable lags of these policies creep into the economy, potentially slowing credit creation and growth.
• Compared to a global 60/40 benchmark, our strategic portfolio (5-10Y) is slightly overweight fixed income relative to equities. Overall, our portfolio has not shifted significantly into or out of any asset classes this quarter.
• Our team at Invesco Investment Solutions remains quite positive on our long-term capital market assumptions (CMAs). Most of the 170+ assets we cover are expected to return more in the coming decade than in the last decade.

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