Markets

10-Year Annualized Forecasts for Major Asset Classes

Published

4 months ago

June 14, 2023

Marcus Lu

10-year annualized forecasts for major asset classes

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10-Year Annualized Forecasts for Major Asset Classes

While there’s no way of predicting the future, quantitative models can help us come up with a general idea of how different asset classes may perform in the future.

One example is Vanguard’s Capital Markets Model (VCMM), which has produced a set of 10-year annualized return forecasts for both equity and fixed income markets.

Visualized above, these projections were published on May 17, 2023, and are based on the March 31, 2023 running of the VCMM.

Equity Returns

The equity forecasts from this infographic are listed in the following table.

Asset Class	Return Forecast (lower)	Return Forecast (upper)	Median Volatility
U.S. Equities	4.1%	6.1%	17.0%
U.S. Value	4.4%	6.4%	19.6%
U.S. Growth	1.4%	3.4%	18.2%
U.S. Large-Cap	4.1%	6.1%	16.7%
U.S. Small-Cap	4.4%	6.4%	22.3%
U.S. Real Estate Investment Trusts	4.4%	6.4%	20.1%
Global Equities ex-U.S. (unhedged)	6.4%	8.4%	18.2%
Global ex-U.S. Developed Markets Equities (unhedged)	6.1%	8.1%	16.6%
Emerging Markets Equities (unhedged)	6.1%	8.1%	25.9%

A key takeaway here is that Vanguard expects international equities to outperform U.S. equities over the next decade.

We believe that the valuation-based expansion in U.S. equities is sowing the seeds for lower returns in the decade.

A valuation-based expansion refers to the increase in a company’s market value, rather than its intrinsic value. In other words, Vanguard doesn’t believe that current U.S. equity valuations are justified, and that this will dampen performance over the next decade.

Cited reasons for international outperformance include more favorable valuations, higher dividend payout ratios, and a potentially weaker U.S. dollar.

Fixed Income Returns

Now turning to fixed income, here are the forecasts used in this infographic.

Asset Class	Return Forecast (lower)	Return Forecast (upper)	Median Volatility
U.S. Aggregate Bonds	3.6%	4.6%	5.5%
U.S. Treasury Bonds	3.3%	4.3%	5.7%
U.S. Intermediate Credit Bonds	4.2%	5.2%	5.2%
U.S. High-Yield Corporate Bonds	5.5%	6.5%	10.1%
U.S. Treasury Inflation-Protected Securities	2.7%	3.7%	5.0%
U.S. Cash	3.4%	4.4%	1.4%
Global Bonds ex-U.S. (hedged)	3.6%	4.6%	4.4%
Emerging Markets Sovereign Bonds	5.6%	6.6%	10.9%
U.S. Inflation	2.0%	3.0%	2.3%

Several bond indexes saw record-breaking declines in 2022 thanks to the unprecedented speed of interest rate hikes. Despite this turmoil, Vanguard believes that investors with a longer horizon will actually be better off as a result. The reasoning here is that cash flows can now be reinvested at much higher rates, which over time should offset any declines in an investor’s bond portfolio.

Vanguard also expects U.S. inflation to be contained over the next decade. The firm has confidence in the ability of central banks to keep inflation at their target rates (2% in most developed economies).

Related Topics:investing shares volatility equity equities stocks bonds personal finance returns forecasts fixed income

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Mining

Ranked: The World’s Top Diamond Mining Countries, by Carats and Value

Who are the leaders in rough diamond production and how much is their diamond output worth?

Creator Program

Published

4 days ago

September 29, 2023

Pallavi Rao

A cropped chart showing the leaders in rough diamond mining and how much their diamond output is worth.

Ranked: World Diamond Mining By Country, Carat, and Value

Only 22 countries in the world engage in rough diamond production—also known as uncut, raw or natural diamonds—mining for them from deposits within their territories.

This chart, by Sam Parker illustrates the leaders in rough diamond production by weight and value. It uses data from Kimberly Process (an international certification organization) along with estimates by Dr. Ashok Damarupurshad, a precious metals and diamond specialist in South Africa.

Rough Diamond Production, By Weight

Russia takes the top spot as the world’s largest rough diamond producer, mining close to 42 million carats in 2022, well ahead of its peers.

ℹ️ Carat is the unit of measurement for the physical weight of diamonds. One carat equals 0.200 grams, which means it takes over 2,265 carats to equal 1 pound.

Russia’s large lead over second-place Botswana (24.8 million carats) and third-ranked Canada (16.2 million carats) indicates that the country’s diamond production is circumventing sanctions due to the difficulties in tracing a diamond’s origin.

Here’s a quick breakdown of rough diamond production in the world.

Rank	Country	Rough Diamond Production (Carats)
1	🇷🇺 Russia	41,923,910
2	🇧🇼 Botswana	24,752,967
3	🇨🇦 Canada	16,249,218
4	🇨🇩 DRC	9,908,998
5	🇿🇦 South Africa	9,660,233
6	🇦🇴 Angola	8,763,309
7	🇿🇼 Zimbabwe	4,461,450
8	🇳🇦 Namibia	2,054,227
9	🇱🇸 Lesotho	727,737
10	🇸🇱 Sierra Leone	688,970
11	🇹🇿 Tanzania	375,533
12	🇧🇷 Brazil	158,420
13	🇬🇳 Guinea	128,771
14	🇨🇫 Central African Republic	118,044
15	🇬🇾 Guyana	83,382
16	🇬🇭 Ghana	82,500
17	🇱🇷 Liberia	52,165
18	🇨🇮 Cote D'Ivoire	3,904
19	🇨🇬 Republic of Congo	3,534
20	🇨🇲 Cameroon	2,431
21	🇻🇪 Venezuela	1,665
22	🇲🇱 Mali	92
	Total	120,201,460

Note: South Africa’s figures are estimated.

As with most other resources, (oil, gold, uranium), rough diamond production is distributed unequally. The top 10 rough diamond producing countries by weight account for 99.2% of all rough diamonds mined in 2022.

Diamond Mining, by Country

However, higher carat mined doesn’t necessarily mean better value for the diamond. Other factors like the cut, color, and clarity also influence a diamond’s value.

Here’s a quick breakdown of diamond production by value (USD) in 2022.

Rank	Country	Rough Diamond Value (USD)
1	🇧🇼 Botswana	$4,975M
2	🇷🇺 Russia	$3,553M
3	🇦🇴 Angola	$1,965M
4	🇨🇦 Canada	$1,877M
5	🇿🇦 South Africa	$1,538M
6	🇳🇦 Namibia	$1,234M
7	🇿🇼 Zimbabwe	$424M
8	🇱🇸 Lesotho	$314M
9	🇸🇱 Sierra Leone	$143M
10	🇹🇿 Tanzania	$110M
11	🇨🇩 DRC	$65M
12	🇧🇷 Brazil	$30M
13	🇱🇷 Liberia	$18M
14	🇨🇫 Central African Republic	$15M
15	🇬🇾 Guyana	$14M
16	🇬🇳 Guinea	$6M
17	🇬🇭 Ghana	$3M
18	🇨🇲 Cameroon	$0.25M
19	🇨🇬 Republic of Congo	$0.20M
20	🇨🇮 Cote D'Ivoire	$0.16M
21	🇻🇪 Venezuela	$0.10M
22	🇲🇱 Mali	$0.06M
	Total	$16,290M

Note: South Africa’s figures are estimated. Furthermore, numbers have been rounded and may not sum to the total.

Thus, even though Botswana only produced 59% of Russia’s diamond weight in 2022, it had a trade value of nearly $5 billion, approximately 1.5 times higher than Russia’s for the same year.

Another example is Angola, which is ranked 6th in diamond production, but 3rd in diamond value.

Both countries (as well as South Africa, Canada, and Namibia) produce gem-quality rough diamonds versus countries like Russia and the DRC whose diamonds are produced mainly for industrial use.

Which Regions Produce the Most Diamonds in 2022?

Unsurprisingly, Africa is the largest rough diamond producing region, accounting for 51% of output by weight, and 66% by value.

Rank	Region	Share of Rough Diamond Production (%)	Share of Rough Diamond Value (%)
1	Africa	51.4%	66.4%
2	Europe	34.9%	32.9%
3	North America	13.5%	52.8%
4	South America	0.2%	2.4%

However diamond mining in Africa is a relatively recent phenomenon, fewer than 200 years old. Diamonds had been discovered—and prized—as far back as 2,000 years ago in India, later on spreading west to Egyptian pharaohs and the Roman Empire.

By the start of the 20th century, diamond production on a large scale took off: first in South Africa, and decades later in other African countries. In fact between 1889–1959, Africa produced 98% of the world’s diamonds.

And in the latter half of the 20th century, the term blood diamond evolved from diamonds mined in African conflict zones used to finance insurgency or crime.