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2023 Capital Market Assumptions: Five-Year Perspective

In-depth analysis and insights to inform your decision-making.

We are pleased to present the fifth annual publication of T. Rowe Price’s Capital Market Assumptions (CMAs). Last year’s edition highlighted a number of challenges for financial markets, including the persistence of elevated inflation, a dramatic inflection in monetary policy, and delays to the resumption of normal economic activity in the wake of the COVID pandemic. These challenges, along with unanticipated risks—particularly Russia’s invasion of Ukraine—made 2022 a difficult year for investors. At the outset of 2023, financial markets still face near-term headwinds, but investors with a longer-term perspective have some room for optimism, in our view.

As noted in the past, our predictions about the future performance of financial assets are rooted in our assessment of present valuations. Financial assets, across both equities and fixed income, cheapened meaningfully in 2022. While the path to those valuations was painful, we believe the resulting lower levels provide a supportive first step for returns over the next five years.

With those starting valuations in mind, our return forecasts this year have shifted higher compared to our 2022 CMAs. Within equity markets, lower starting multiples and resilient nominal earnings expectations provide the basis for increased return expectations. Within fixed income, higher starting yields and expectations of falling yields on sovereign debt support higher forecasts for total returns. Lastly, our expected returns for alternative investment strategies also have increased to reflect higher nominal risk-free rates, expectations for higher equity-related premia, and continued opportunities for alpha generation.

T. Rowe Price’s CMAs are best understood as forecasts of what we believe are the central tendencies of forward returns. We do not seek to predict actual or realized returns as there is bound to be material variation around this central tendency in any given historical or future period. For this reason, our approach to portfolio construction relies on multiple optimization methods and robustness checks.

Our baseline forecasts incorporate the insights of senior portfolio managers and analysts across T. Rowe Price’s equity, fixed income, and multi-asset divisions. We believe this interdisciplinary approach, which seeks to capture both fundamental and quantitative insights, delivers the firm’s collective best thinking.

We acknowledge the significant impact that environmental, social, and governance (ESG) factors may have on the future risk and return characteristics of different assets. These factors vary in materiality and impact across both sectors and individual securities. Additionally, some ESG trends may play out over time horizons beyond our 5-year forecasting period. Consequently, we have not explicitly adjusted our forecasts to reflect ESG considerations. However, our firm’s investment processes are fully ESG integrated and each senior portfolio manager or analyst we survey does analyze and monitor these factors when forming asset class views and making investment decisions.

We encourage your questions, comments, and feedback as they truly impact the continuous improvements we seek to make to this publication. Please feel free to contact your T. Rowe Price relationship manager and/ or any of the investment professionals who contributed to this effort.

This information is not intended as a recommendation to invest in any particular asset class or strategy or as a promise of future performance.


This material is being furnished for general informational purposes only. The material does not constitute or undertake to give advice of any nature, including fiduciary investment advice, and prospective investors are recommended to seek independent legal, financial and tax advice before making any investment decision. T. Rowe Price group of companies including T. Rowe Price Associates, Inc. and/or its affiliates receive revenue from T. Rowe Price investment products and services. Past performance is not a reliable indicator of future performance. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested.

The material does not constitute a distribution, an offer, an invitation, a personal or general recommendation or solicitation to sell or buy any securities in any jurisdiction or to conduct any particular investment activity. The material has not been reviewed by any regulatory authority in any jurisdiction.

Information and opinions presented have been obtained or derived from sources believed to be reliable and current; however, we cannot guarantee the sources' accuracy or completeness. There is no guarantee that any forecasts made will come to pass. The views contained herein are as of the date noted on the material and are subject to change without notice; these views may differ from those of other T. Rowe Price group companies and/or associates. Under no circumstances should the material, in whole or in part, be copied or redistributed without consent from T. Rowe Price.

The material is not intended for use by persons in jurisdictions which prohibit or restrict the distribution of the material and in certain countries the material is provided upon specific request.  

It is not intended for distribution to retail investors in any jurisdiction.

USA—Issued in the USA by T. Rowe Price Associates, Inc., 100 East Pratt Street, Baltimore, MD, 21202, which is regulated by the U.S. Securities and Exchange Commission. For Institutional Investors only.

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