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Key Takeaways

• The strong price performance of equities in 2021 has led to a reduction in expected returns for world markets. Despite this, equity valuations do not look excessive relative to other asset classes
• Low starting yields for government bonds provide limited room for capital growth, but we still expect a small premium over cash from the additional income
• To achieve similar returns to history, portfolios may need to look different to prior years, as valuations in core asset classes compel investors to look more widely for returns and diversification