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  • Callum Thomas, Investment Strategist

Adjusting to a low yield world


Low inflation, low starting point yields and constrained global growth means investors will need to adjust to single digit annual returns for the medium term. In this article, we provide our investment outlook for the medium term by drawing on our capital market assumptions across growth and defensive assets.

Performance expectations

Regionally, global equities most closely affected by unconventional policy easing appear most likely to outperform, notably in Japanese, Chinese, and European equities, where the central banks are still aggressively easing monetary policy, valuation is supportive and economic tailwinds such as cheaper energy prices are in play; these are also regions that suffer from structural challenges.

Dominant themes constraining the growth outlook

Several themes are considered in our projections for capital growth: low inflation; aging populations; slower household debt accumulation; the downtrend in commodity prices; ongoing technological innovation and automation; reinvigorated advanced countries versus struggling emerging markets; increased geopolitical tensions in a multi-polar world; increased regulation and scepticism of free markets. Most of these are likely to have the effect of constraining nominal economic growth and hence total returns. Increasing automation is positive for profits and the downtrend in commodity prices is positive for commodity users such as the US, Europe, Japan and Asia however, not so for Australia due to lowered real economic growth assumptions.

“Increasing automation is positive for profits and the downtrend in commodity prices is positive for commodity users.”


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