Equities to dominate bonds as a financial asset in the future – Natixis

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Going forward, inflation and interest rates are most likely to slowly rise. Analysts at Natixis see that in the future, bonds will be dominated by equities as a financial asset, which was not the case from 1980 to 2020. This suggests a major change to the structure of portfolios awaits.

A shift in portfolios from bonds into equities

“From 1980 to 2020, bond returns were quite high, between 7% and 8%, thanks to declining long-term interest rates. The excess return on equities was only 4% to 6%, with a much higher equity risk.”

“In the future, bonds will be dominated by equities as bond returns will become very low due to the gradual rise in long-term interest rates, with the risk/return relationship becoming highly negative for bonds.”

 

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