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Alternative Thinking

2026 Capital Market Assumptions for Major Asset Classes

January 14, 2026 - Portfolio Solutions Group

We update our estimates of medium-term (5- to 10-year) expected returns for major asset classes. We also include a discussion on currency risk and currency hedging, with particular considerations for U.S. and European investors.

White Paper

Bond Market Focus: Yield Curves and Mean Reverting Rate Expectations

October 7, 2025 - Antti Ilmanen

Part 9: The yield curve largely reflects investors’ tendency to expect rates to revert toward past norms. This paper highlights how this pattern explains both the predictive power and the persistent forecasting missteps in bond markets.

White Paper

Equity Market Focus: Subjective Expected Returns

August 21, 2025 - Antti Ilmanen

Part 7: While objective expectations are typically inferred from market prices or yields, subjective expectations are best inferred from survey data. This paper highlights interesting differences across investor groups in their tendency to overextrapolate or to be overoptimistic.

White Paper

Diversifiers Forever

July 31, 2025 - Thomas Maloney Josh Stone

In a portfolio whose investment horizon is forever, do diversifying investments add any value? In this short paper, we illustrate the surprising power of diversification for ultra-long-term investors.

White Paper

Equity Market Focus: Objective Expected Returns

July 31, 2025 - Antti Ilmanen Thomas Maloney

Part 6: This paper reviews the strengths and weaknesses of using valuation-based metrics like CAPE and CAEY to estimate long-run equity market returns. While these models remain the most robust objective tools available, their predictive power is nuanced and often overstated.

White Paper

Equity Market Focus: Interrogating the Historical Data

July 10, 2025 - Antti Ilmanen

Part 5: We discuss how historical average returns can be useful estimates of future expected returns (only) if expected returns are constant and the sample is unbiased.

White Paper

How Did We Get Here? A Brief History of Expected Returns Formation

June 20, 2025 - Antti Ilmanen Thomas Maloney

Part 4: We present our history of expectation formation: How have investors formed long-run return expectations over time, and how have academics perceived that investors do it, or ought to do it?

Perspective

(So) What If You Miss the Market’s N Best Days?

June 5, 2025 - Cliff Asness

This post revisits and refutes a long-standing argument against market timing—that missing just a few of the market’s best days can devastate returns—by demonstrating its logical flaws and statistical irrelevance. Using both historical and out-of-sample data, it shows that the risks and rewards of market timing are more symmetric than commonly portrayed.

White Paper

Exceptional Expectations: U.S. vs. Non-U.S. Equities

May 9, 2025 - Antti Ilmanen Thomas Maloney

Part 2: We analyze the persistent outperformance of US equities compared to non-US equities, focusing on the drivers of relative performance, including fundamentals and valuations. We examine historical data, valuation trends, and the implications for future returns, highlighting the potential for mean reversion and the benefits of global diversification.

White Paper

How Do Investors Form Long-Run Return Expectations?

April 28, 2025 - Antti Ilmanen

Part 1: We provide an overview of the contrasting ways investors form long-run return expectations and examine the tensions between "objective" yield-based expected returns and "subjective" rearview-mirror expectations. We also discuss the dangers of a rearview-mirror mindset and emphasize the importance of forward-looking measures.