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Amid global population aging, J.P. Morgan Asset Management is trimming its growth projections, and sees weak investment returns over the next decade or so.

In a report detailing its latest long-term market assumptions, J.P. Morgan Asset Management forecasted modest global growth over the next 10 to 15 years. It said that real global growth is expected to average 2.3% over that period, down by 20 basis points (bps) from its previous projections.

The forecast for developed market growth remains unchanged at 1.5%, but the firm has trimmed its forecasts for emerging markets by 35 bps to 3.9%.

“Population aging is broadly to blame for the low forecasts for global growth,” the report stated.

For Canada, J.P. Morgan Asset Management has raised its forecast assumption by 10 bps to 1.6%.

Global inflation is forecast at 2.2% over the time horizon, and monetary policy is expected to remain “extremely accommodative throughout this cycle and well into the next one, leading to a significant delay in rate normalization being built into forecasts,” the report said.

“Our growth projections for the 10-15 year investment horizon remain relatively modest with aging populations a key headwind, while a technology-driven boost to productivity represents the main upside risk,” David Kelly, chief global strategist at J.P. Morgan Asset Management, said in a statement.

“Portfolio flexibility remains key for investors looking to manage cycle uncertainty, with those seeking higher returns continuing to be drawn to private markets and other alternatives as a both a diversifier and source of alpha,” he added.

The firm also trimmed its return expectations for a 60/40 U.S. stock-bond portfolio by 10 bps to 5.4%.

Its long-term return outlook for equities is 6.5% (in U.S. dollar terms), up by 20 bps from its previous forecast, and its forecast for emerging markets is 8.7% (in local currency terms).

Stronger returns are expected from private equity (PE). The firm has raised its forecast for PE returns by 55 bps to 8.8%.

“Casting the net more widely, forecast returns from global real assets and infrastructure have held up remarkably well, and given the resilience of their cash flows they may even act as a proxy for duration in portfolios with limited short run liquidity demands. Manager selection remains the primary determinant of returns across alternatives,” the report stated.

“Our 2020 assumptions are being released against a backdrop of trade uncertainty between the world’s economic superpowers and a recent reversal in the trajectory of global monetary policy,” said John Bilton, head of global multi-asset strategy at J.P. Morgan Asset Management.

“In an environment of very low bond yields, investors must reassess how to design the optimal portfolio as the trade-off is no longer between foregone risky asset returns and reduced portfolio risk, but is instead between a zero or even negative return in exchange for that risk reduction.”