Despite the pandemic, the long-term paths of slow growth and low inflation remain intact, albeit with greater uncertainty around inflation. The pandemic has triggered even easier monetary policy, although fiscal policy is likely to take the leading role in promoting economic growth in the decade ahead.
Strong returns from equities and high-quality bonds through the pandemic have left valuations stretched. A traditional 60/40 portfolio of global stocks and U.S. bonds presents a very subdued frontier of potential returns. However, many other asset classes shine above this low horizon, including European and Emerging markets equities, high-yield and emerging market debt and an assortment of alternative investments. In addition, active management should be able to take advantage of distortions in relative valuations that have been created by years of central bank intervention and momentum investing.