Trends in AI, energy and globalization cited as key elements affecting economic growth globally during next decade

Northern Trust today issued its Capital Market Assumptions 2025 Edition, forecasting moderate global equity performance, improving high yield bond returns and strength in private credit.

The CMA also identifies three key trends likely to affect markets and the global economy over the next decade – AI-Enabled Productivity, Navigating the Energy Transition and Globalization: Bent, Not Broken – that provide the foundation for returns of stocks, bonds, real assets and alternatives.

“The next 10 years will present investors with a complex landscape of market and economic trends to navigate,” Northern Trust Asset Management (NTAM) Global Chief Investment Officer Angelo Manioudakis said. “As economic growth moderates, we think investors will look to uncover future drivers of growth. We believe the adoption of AI, new energy sources and trends in global trade will cause divergent paths in economic growth globally.”

Over the coming decade, Northern Trust forecasts the following long-term average annualized return expectations for a wide range of asset classes:

  • Equities: 7.5% annualized return for U.S. equities and 5.8% annualized return for developed markets ex-U.S. equities, as we expect U.S. stocks to continue to outperform European stocks, and 6.4% annualized return for emerging markets.
  • Fixed Income: 4.7% annualized return for U.S. investment grade bonds and 5.6% annualized return for U.S. high yield bonds, with strong fundamentals supporting high yield securities.
  • Real Assets: 6.6% annualized return for global listed infrastructure, where utilities could benefit from a surge in electricity demand from AI.
  • Alternatives: 8.4% annualized return for private credit and 10.1% annualized return for private equity, supported by AI opportunities and potentially more mergers and acquisitions.

“Over the next decade, we expect equity returns to moderate from the highs of the last couple of years. In the bond market, we believe credit spreads will increase from current low levels but stay below the long-term average, supported by stable economic growth and solid credit fundamentals,” NTAM Chief Investment Officer of Global Asset Allocation Anwiti Bahuguna said. “Private investments may prove to offer even more attractive returns relative to the public equity and bond markets. Declining interest rates will drive demand for private credit to boost M&A activity, while AI and other technology advances will push low double-digit growth in private equity and venture capital.”

The CMA’s asset class forecasts are driven by three key themes that Northern Trust investment experts see affecting markets and the economy over the next 10 years:

  • AI-Enabled Productivity: As companies invest in artificial intelligence, AI-enabled productivity will enhance economic growth. This should help countries combat shifting demographic trends that potentially damage productivity, while also boosting economic growth.
  • Navigating the Energy Transition: Global energy demand continues to increase, along with a desire for energy independence. Global economies must navigate policy, technological innovations and finance mechanisms to meet those demands. How energy is generated or accessed over the next decade will be critical to long-term economic, climate and investment impacts.
  • Globalization: Bent, Not Broken: Globalization may have slowed but it has not reversed. Geopolitical tensions are morphing supply chains and trade pacts, which will lead to risks and opportunities over the next decade. This may present investors with the opportunity to be increasingly selective.

Rooted in deep capital market analysis, the CMA is an annual report of long-term average annualized return expectations for a range of asset classes, including fixed income, equities, real assets and alternatives. The CMA informs Northern Trust’s investment decisions and strategic asset allocation recommendations. The full report, including detailed 10-year asset class forecasts, is available at https://www.northerntrust.com/insights-research/2025/investment-managment/capital-markets-assumption-2025.

About Northern Trust Asset Management

Northern Trust Asset Management is a global investment manager that helps investors navigate changing market environments in efforts to realize their long-term objectives. Entrusted with $1.3 trillion in assets under management as of December 31, 2024, we understand that investing ultimately serves a greater purpose and believe investors should be compensated for the risks they take — in all market environments and any investment strategy. That’s why we combine robust capital markets research, expert portfolio construction and comprehensive risk management in an effort to craft innovative and efficient solutions that seek to deliver targeted investment outcomes. As engaged contributors to our communities, we consider it a great privilege to serve our investors and our communities with integrity, respect and transparency.

Northern Trust Asset Management is composed of Northern Trust Investments, Inc., Northern Trust Global Investments Limited, Northern Trust Fund Managers (Ireland) Limited, Northern Trust Global Investments Japan, K.K., NT Global Advisors, Inc., 50 South Capital Advisors, LLC, Northern Trust Asset Management Australia Pty Ltd, and investment personnel of The Northern Trust Company of Hong Kong Limited and The Northern Trust Company.

About Northern Trust

Northern Trust Corporation (Nasdaq: NTRS) is a leading provider of wealth management, asset servicing, asset management and banking to corporations, institutions, affluent families and individuals. Founded in Chicago in 1889, Northern Trust has a global presence with offices in 24 U.S. states and Washington, D.C., and across 22 locations in Canada, Europe, the Middle East and the Asia-Pacific region. As of December 31, 2024, Northern Trust had assets under custody/administration of US$16.8 trillion, and assets under management of US$1.6 trillion. For more than 135 years, Northern Trust has earned distinction as an industry leader for exceptional service, financial expertise, integrity and innovation. Visit us on northerntrust.com. Follow us on Instagram @northerntrustcompany or Northern Trust on LinkedIn.

Northern Trust Corporation, Head Office: 50 South La Salle Street, Chicago, Illinois 60603 U.S.A., incorporated with limited liability in the U.S. Global legal and regulatory information can be found at https://www.northerntrust.com/terms-and-conditions.

The publisher’s sale of this reprint does not constitute or imply any endorsement or sponsorship of any product, service or organization.

Europe, Middle East, Africa & Asia-Pacific Contacts: Camilla Greene +44 (0) 207 982 2176 Camilla.Greene@ntrs.com

Simon Ansell +44 (0) 207 982 1016 Simon.Ansell@ntrs.com

US & Canada Contact: Joanne Zalatoris +1 (312) 900-3462 Joanne.Zalatoris@ntrs.com

http://www.northerntrust.com

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