Peter van der Welle

Robeco has published the 16th edition of its 5-year outlook, Expected Returns 2027-2031, this year titled The Great Rewiring. The outlook explains that just like human brains which rewire themselves when faced with disruption, the global economy is building new pathways, rewiring trade, capital and production.

The outlook says the desire for greater energy security and the rise of artificial intelligence, which is remodeling the entire business landscape, means the age of efficiency is gradually giving way to an age of plasticity. For much of the past three decades, investors operated in a world optimized for efficiency. Today, economic architecture is moving from a ‘just-in-time’ efficiency to a ‘just-in-case’ resilience.

Geopolitical fragmentation such as the closure in 2026 of the Strait of Hormuz, through which one-sixth of the world’s energy supplies pass, exemplifies this well. The global economy is creating new ways of circumventing these chokepoints, not least in a surge of investment in renewable energy sources to reduce reliance on fossil fuels.

A new kind of Renaissance

Peter van der Welle, Strategist Multi-Asset Solutions at Robeco: “Last year we argued that the world was entering a ‘Stale Renaissance’: a period in which extraordinary technological progress coexisted with a drag from elevated economic policy uncertainty. This year we remain firmly committed to the Renaissance part of that thesis, but are now inclined to nuance the ‘stale’ element.”

Laurens Swinkels, Head of Solutions Research at Robeco: “What has changed is our understanding of the cyclical implications of the capex underway to facilitate the AI revolution, as well as the resilience of the global economy in light of the huge supply disruption to the global oil market due to the closure of the Strait of Hormuz, plus the aftermath of the highest US tariffs since the 1930s. This resilience stems from the ability to adapt and rewire in spite of emerging chokepoints.”

The three dimensions of the Great Rewiring

The ‘Great Rewiring’ is seen occurs along three closely related dimensions that will have ramifications for future asset returns. First, trade is being rewired as firms diversify supply chains and governments increasingly value security alongside efficiency. The world is not deglobalizing, but instead it is reorganizing, creating more dispersion in cross-regional trade volumes.

Second, the role of capital is being rewired, as we have arrived at a major inflection point from a consumption-led economy toward a more investment-led one. The physical economy led by massive AI and renewable energy infrastructure is on the rise; the asset-light economic model may start to lose ground in the next five years.

Third, production itself is being rewired. The next phase of the AI-led productivity renaissance will be led by firms that manage to transform and redesign production processes around it. We believe that AI will predominantly augment labor instead of displacing it.

Base, bull and bear cases

Expected Returns offers a base, bull and bear case in how this may play out over the next five years:

Base case: The ‘Great Rewiring’ (50% probability)

The Great Rewiring causes a rejuvenated expansion. This is ultimately a story of a successful value transfer from AI enablers to AI adopters. Yet, it comes at a cost of higher inflation and technological unemployment. The rewiring of trade encourages resilience rather than efficiency, the rewiring of capital raises investment intensity, and the rewiring of production lifts productivity through automation.

Bull case: The ‘Luminous Renaissance’ (15% probability)

The Great Rewiring proves substantially more successful than anticipated in raising trend GDP growth and delivering benign disinflation. This scenario sees the global economy experience a genuine productivity renaissance reminiscent of the late 1990s. The key difference is that AI proves more transformative because it accelerates not only automation but also its own diffusion.

Bear case: The ‘Synaptic Decay’ (35% probability)

The Great Rewiring stalls before its benefits can be realized. The economy continues to incur the costs of adaptation while failing to capture the expected gains from AI. What begins as a deflationary overcapacity story as the AI bubble implodes gradually morphs into more troubling stagflation. Inflation remains structurally elevated and the global economy loses connectivity faster than it gains adaptability.

Investment implications

For asset class returns, this ‘Great Rewiring’ means that equities are again the most favored, followed by real estate. We expect emerging market equities to deliver the highest five-year annualized returns of 8.0% in euros, followed by developed market stocks returning 7.0%. Listed real estate is also seen delivering 7.0%, with the most positive outlook for Real Estate Investment Trusts (REITs) since 2014.

Expected Returns forecasts for the major asset classes (base case)

In fixed income, the highest five-year annualized returns are seen at 5.5% coming from emerging market debt (EMD) denominated in local currency. EMD in hard currency is seen returning 4.00%. Developed global government bonds (hedged) are also seen delivering 4.0%, while domestic government bonds are forecast to return 3.25%. In credits, global corporate high yield bonds (hedged) are forecast to return 4.25%, while their investment grade counterparts are seen delivering 3.75%.

Commodities, whose returns are heavily influenced by conflicts and the value of the US dollar, are expected to return 4.0%. Domestic cash is forecast to return 3.0%, putting it slightly above the predicted inflation rate of 2.5%, which is seen remaining at 3.0%, and will have implications for interest rate policy over the coming period.

Special topics

This year’s report also features four special topics that reflect the evolving investment landscape:

• ‘Chokepoints and energy security 2.0: How the Middle East conflict has redefined reliably securing power supplies in favor of renewables.
• Emerging markets: A world of different destinies: Exploring the diversity of differing countries, from the tech-heavy to the resource rich.
• Private credit: Opportunity, risk and selectivity in a maturing market: What was once a more specialized source of financing, has become a multi-trillion-dollar asset class.
• Beyond sustainability: Generalized 3D investing: Adding the third dimension of sustainable investing to modern portfolio construction

The post Robeco publishes Expected Returns 2027-2031: ‘The Great Rewiring’ appeared first on AdviserVoice.

Peter van der Welle

Robeco has published the 15th edition of its 5-year outlook, Expected Returns 2026-2030, titled The Stale Renaissance. The report explores a paradoxical economic landscape where technological breakthroughs — particularly in artificial intelligence — coexist with structural macroeconomic challenges and geopolitical uncertainty.

A paradoxical renaissance

Inspired by the contradictions of the historical Renaissance, Robeco’s outlook sees a world where AI systems evolve rapidly, yet their transformative impact is constrained by energy limitations, policy incoherence, and geopolitical fragmentation. The report introduces the concept of the ‘digital Da Vinci’, highlighting how AI agents are poised to revolutionize productivity, even as macro headwinds temper their full potential.

Peter van der Welle, Strategist Multi-Asset Solutions at Robeco: “While AI promises a renaissance in productivity, we believe this revival will appear stale upon closer inspection. Structural inhibitors – from constrained monetary policy to geopolitical restraint – will limit the breadth of economic gains.”

Laurens Swinkels, Head of Solutions Research at Robeco: “In a world where paradox abounds, great inventions will still emerge. Investors must look beyond traditional assets and embrace unloved hedges like commodities and Real Estate Investment Trusts to navigate the coming years. Diversification and strategic hedging will be key.”

Key headwinds

Robeco’s outlook identifies four major headwinds that could inhibit the vitality of this technological renaissance. First, conflicted supremacy reflects the growing challenges to US leadership, which is increasingly hampered by internal policy inconsistencies and rising global skepticism. Second, contained escalation describes a geopolitical environment marked by strategic restraint, where tensions – such as the US-China trade war – remain unresolved but do not escalate into full-blown conflict.

Third, constrained normalisation points to persistent inflation levels that exceed central bank targets, thereby limiting the flexibility of monetary policy. Finally, conditional sustainability captures the evolving nature of climate finance, which is shifting from idealistic ambitions to a more pragmatic focus on measurable impact and accountability. These cyclical challenges are underpinned by deeper structural forces, including persistent labor market challenges, rising sovereign debt, and the erosion of the US dollar’s global dominance.

Base case: The Stale Renaissance (50% probability)

Robeco’s central scenario anticipates moderate global growth, with US real GDP expanding at 2.1% annually. Meanwhile, the eurozone, Japan, and emerging markets are expected to improve their relative growth positions. Inflation in developed markets is forecast to average 2.5%, with the US slightly higher at 2.75% due to falling immigration and rising tariffs. Despite technological progress, policy incoherence and populism are expected to dampen investor confidence and capital flows.

Bull case: The Luminous Renaissance (15% probability)

In this optimistic scenario, AI adoption accelerates across industries, removing barriers to productivity and enabling a synchronized global upswing. Inflation remains at target levels, and geopolitical tensions ease, potentially reviving globalization. Real GDP growth could exceed trend levels, with broad-based investment opportunities emerging.

Bear case: The Exorbitant Decay (35% probability)

This scenario envisions a breakdown of global economic institutions and principles. US policy incoherence undermines the dollar’s dominance, triggering stagflation and fiscal dominance. Trade wars and geopolitical instability lead to a security premium replacing the peace dividend, with central bank independence eroding.

Investment implications

Robeco expects a more concentrated and momentum-driven market, with fewer asset classes delivering above-average risk premiums. Valuations for US equities and high yield bonds appear stretched, suggesting elevated downside risks. In contrast, emerging market assets – particularly debt in hard currency – are projected to offer strong relative returns. Investors should prepare for a more selective environment, where thoughtful allocation and scenario-based planning are key to navigating uncertainty and capturing long-term value.

Special topics

This year’s report also features four special topics that reflect the evolving investment landscape:

• ‘Artificial intelligence for small-cap stock selection’, showcasing how machine learning can uncover alpha in under-researched segments.
• ‘What to do when safe havens turn into stormy waters?’, analyzing the shifting role of sovereign debt amid rising fiscal risks.
• ‘A liquid alternative to private equity’, exploring how public markets can replicate private equity returns with greater liquidity and sustainability integration.
• ‘Staying the course on sustainable investing’, reaffirming the long-term value of stewardship, net-zero commitments, and resilience in a polarised world.

Read the report.

The post Robeco publishes expected returns 2026-2030: ‘The Stale Renaissance’ appeared first on AdviserVoice.

Peter van der Welle

Robeco has published its twelfth annual Expected Returns report (2023-2027), a look at what investors can expect over the next five years for all major asset classes, along with macro-economic predictions.

Against the backdrop of many moving and unpredictable market parts, including the energy and food crises, double digit inflation in developed countries, and China’s trajectory as the largest contributor to global growth, Robeco is framing the years leading up to 2027 as ‘The Age of Confusion’. The continued pandemic related fiscal stimulus, supply chain problems, and the Russia-Ukraine war have contributed to unexpectedly high inflation over the past year. Only veteran investors have previously experienced the devastating effect that such high levels have on purchasing power and investment portfolios.

Accordingly, we expect asset returns to remain below their long-term historical averages over the coming five years, mainly due to the low risk-free rate. It’s worth noting that the expected equity risk premium of 3%, for the first time in the 12-year history of the Expected Returns publication, will be below its long-term average of 3.5%. For US dollar-based investors with an international portfolio, perspectives are rosier as other currencies are expected to appreciate against the US dollar, with the USD bull market coming to an end in the next five years.

With its impact permeated the Expected Returns, climate risk has been an integrated part of Robeco’s five-year outlook since last year’s edition. Robeco foresees little to no impact from climate change on developed government bonds and investment grade corporate bonds. For developed market equities, there is a slightly negative signal due to both lower economic growth and physical risks. Commodities are the only asset class to receive a positive climate signal, mostly because the energy transition and physical climate risks will put upward pressure on commodity prices.

In addition to the five-year outlook, the report also covers four special topics, related to the theme:

• the emerging trade-off in global trade
• gaining an edge with alternative data
• the energy transition comes with a price tag
• (no) food for thought.

Peter van der Welle, Strategist Multi Asset at Robeco: ”We find that the bar for inflation becoming entrenched is pretty high and recessions, which we expect one way or another, are highly disinflationary. However, a right-hand skew to the expected inflation frequency distribution for developed economies is a key thread for 2023-2027. “

Laurens Swinkels, Researcher at Robeco: “In this ‘age of confusion’, the future has become less predictable and that includes the consequences of climate risk. The exact magnitude of climate change over the next decades is uncertain, and its impact on asset prices is even more unclear. However, what we do know is that asset allocators need to seriously consider the long-run impact of climate change on asset class returns.”

The post Expected returns 2023-2027: ‘The Age of Confusion’ appeared first on AdviserVoice.