Equity Markets with Long-Term Return Potential
As a strong equity year comes to an end, investors are asking themselves how much return potential remains for the coming years.
As long-term investors, we generally prefer equities over other asset classes due to their higher return potential in the long run.
However, markets have already appreciated considerably, and equity valuations are stretched in several countries, especially in the U.S.
If you're looking for equity markets that still offer attractive return potential based on their current valuation in relation to historical averages, you’ll find our assessment below.
The most relevant columns are the last two on the right (“Forecast” and “Potential” in red), which show the expected real return per annum of several markets (adjusted for different sector compositions, for unadjusted values refer to “Forecast” in blue right in the middle) as well as the cumulative return necessary to reach an average valuation based on available history.
Unfortunately, most markets show a very low return forecast and a negative cumulative return potential due to currently elevated valuations.
However, there are attractive outliers—especially China and Japan in Asia, as well as Emerging Markets in general, and Germany and the UK in Europe.
These markets undoubtedly have their challenges, which have contributed to their past underperformance and current attractive valuations. Yet, to us, their return potential appears quite promising going forward. So, don’t overlook these markets in your 2025 equity allocation considerations!
This will be my last post for 2024. I wish you all a Merry Christmas and a Happy New Year, and I look forward to connecting with you again in 2025! 🎅