Three charts for investors: anticipating market and currency performance over the next decade

What returns can we expect from the financial markets in 2026? And over the next decade?

Amid questions on the impact of artificial intelligence on global economic productivity, demographic
shifts across regions, persistent geopolitical fragmentation, and a rewiring of global trade and financial ties, our annual review of structural macroeconomic assumptions and their implications for major asset classes takes on heightened significance.

In this series dedicated to the charts that guide investment decisions, we present a focus on expected performance across various asset classes over the next ten years, as well as our currency forecasts over the same horizon. From a more local perspective, we also examine real estate returns in Switzerland. This selection is drawn from our publication “Rethink Capital Market Assumptions.”

More balanced sources of return ahead across assets and equity regions

We expect global equities to keep delivering solid returns thanks to their exposure to both corporate growth and profitability. However, the above-average returns that equities have delivered over the past decade may be hard to repeat. Company valuations are now high, and the returns that the asset class delivers above government bonds, or the ‘equity risk premium’, are low versus recent history, particularly for the US market.

This is not a position on the debate about whether US ‘exceptionalism’ is fading. Leadership in global equities has varied since the 1980s, with the US, Japan, and Switzerland each outperforming at times when measured in US dollar terms. US outperformance has been a powerful driver of US asset dominance in portfolios over the last decade. Now, index convergence and stretched valuations are, we think, very sound reasons for diversifying our global equity allocations.

Bonds should continue to provide portfolios with a steady source of income, particularly corporate bond yields that are relatively high

Bonds should continue to provide portfolios with a steady source of income, particularly corporate bond yields that are relatively high. For credit, we see resilience: good cash returns help offset tight spreads, or the returns that corporate bonds offer over sovereign equivalents. Our USD expected returns are roughly 5.1% for investment grade bonds and 5.7% for high-yield bonds.

Our next 10 years’ expected returns assumptions vs realised last 10 years, in USD

The US dollar is expected to depreciate gradually over the long term

Over the last months, the foreign exchange landscape has shifted from one of a dominant dollar to a more even distribution. Following President Trump’s tariff announcements, the US dollar fell against major currencies such as the euro, Swiss franc, and sterling.

By contrast, the euro and Swiss franc strengthened at the beginning of the year 2025 and retained most of those gains into year-end. Sterling, which was very sensitive to local news, experienced short rallies, but fell against the euro through the year as the Bank of England reverted to easing. In Japan, the big change took place earlier, in March 2024, with the country’s central bank ending negative rates and yield curve control (unlimited transactions to directly influence borrowing costs); officials stepped in when the yen hit historic lows.

Our approach indicates that the US dollar tends to appear somewhat overvalued against major currencies, whereas the euro and sterling indicate signs of modest undervaluation, suggesting potential for gradual appreciation over time

In 2025, though, the yen appreciated against US dollar alongside tariff headlines, before losing its gains and moving back to where it began the year. In this complex and volatile environment, chart 21 provides our estimated movements for the next decade. They apply the prevailing spot rates at the time of computation, and the implied annualised compounded return. Our approach indicates that the US dollar tends to appear somewhat overvalued against major currencies, whereas the euro and sterling indicate signs of modest undervaluation, suggesting potential for gradual appreciation over time. The Swiss franc and Japanese yen also exhibit undervaluation relative to the US dollar, pointing to possible long-term adjustment. As regards non-US dollar pairs, the euro is expected to appreciate against sterling, while it shows a tendency to weaken against the Swiss franc. Overall, these valuation signals provide a directional framework for strategic positioning over the next decade.

Lombard Odier estimated exchange rate movements for the next decade (annual compounding return)

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Switzerland – an exception

Switzerland stands out as an exception to the structurally higher interest rates that we see across developed markets compared to the past decade. The low-rate environment makes generating meaningful returns from Swiss sovereign or even corporate bonds challenging. To enhance yields and income in Swiss franc portfolios, we therefore increase our dedicated allocation to Swiss real estate.

To enhance yields and income in Swiss franc portfolios, we therefore increase our dedicated allocation to Swiss real estate

At the same time, the lack of synchronisation in global monetary policy – the Federal Reserve is still in a rate-cutting cycle while the European Central Bank and Swiss National Bank have completed theirs – favours exposure to international sovereign bonds.

Swiss real estate is benefitting from low interest rates : distribution yield vs Swiss 10-year rates (in %)