LONG-TERM CAPITAL MARKET ASSUMPTIONS

Macroeconomic assumptions
The macroeconomic projections underlying our assumptions call for overall
modest growth accompanied by generally stable inflation.

DEVELOPED MARKETS (DM) GROWTH

Below 25-year historical averages; primarily reflecting slower growth in population and
labor force expansion

1.75

average annual pace

during 10- to 15-year
forecast horizon

Highest expected growth

Lowest expected growth

SWITZERLAND
> 0.5% labor
force growth

AUSTRALIA
> 0.5% labor
force growth

Most of the decline in our DM projections

comes from the labor supply channel.
Only Switzerland and Australia are likely
to experience labor force growth above
0.5% per annum.

INFLATION: Our projections assume developed markets will stay close to their
respective central bank targets.

EMERGING MARKETS (EM) GROWTH

Another round of reductions

SLIGHTLY
BELOW

average annual pace

during 10- to 15-year
forecast horizon

6% Growth rate

Heavy reliance on credit

creation and state-owned
investments put risk into
our China forecast.

3 FACTORS

DELEVERAGING
CYCLE

EXPECTATIONS FOR
SLOWER DM GROWTH

MORE MODEST
COMMODITY PRICES

INFLATION: Continued single-digit inflation is predicted, with further progress in

high-inflation economies (Brazil, India, Turkey, Russia) and modest change elsewhere.