The Global Covid Crisis (GCC) has had a profound impact not just on our lives but also the economy and financial markets. Even after those life-changing developments and sharp market movements, our 5-year total return forecasts have not changed dramatically. We reiterate the view that future returns will fall very short of historical ones, particularly those of the past ten years.


  • The Global Covid Crisis (GCC) has profoundly rattled our lives, economies and markets. The impact on our medium term financial return forecasts is less dramatic: they are broadly in line with those produced a year ago, i.e. unexciting. 
  • Future returns will fall short of historical ones. Cash, US and EA Government Bonds as well IG Credit may well deliver negative returns. In liquid Fixed Income, only EM and European High Yield will provide returns that exceed our muted 5-year inflation projections. Equity valuations seem rich on several dimensions. Yet highly accommodative policies and tailwinds from recovering earnings still point to mid-single digit annual returns over the coming years.
  • Positive risk include a quick end to the GCC and a wave of innovation. Yet risks are tilted to the downside. Vaccine disappointment a spike in inflation and debt sustainability shocks amid high global leverage are the biggest downside risks.
  • Changing central bank strategies will transform the investment paradigm, by leading to lower rates volatility, stretched valuation, reduced diversification benefits and more frequent corrections. More than ever, hedging matters.

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Life after Covid: 5-year total return forecasts


US President-elect Joe Biden has unveiled a $1.9 trillion stimulus package proposal. Following the recent increase in cases, China has imposed new restrictions and lockdowns in the Hebei province. Canada has implemented new restrictions and a provincewide curfew in Quebec that will last until February 8. German Chancellor Angela Merkel warned that the recent rise in Covid-19 cases could force the country to prolong the nationwide lockdown until April.
Following a monster rally in stocks last autumn, multiples are well above historical averages, but equity investors can count on lingering low yields, tighter credit spreads and increasing central banks’ balance sheets which in turn maintain low the cost of equity and the discount rate of future cash flows.
Video Outlook 2021: Repair and Despair
Watch the Outlook video with Vincent Chaigneau, Head of Research at Generali Investments