Chart is for illustrative purposes only. Past performance is not necessarily an indication of future results.
For much of the 2000s, inflation was broadly contained, averaging around 2.6% in the first decade and falling below 2.0% during the 2010s following the global financial crisis. Since the pandemic, however, inflation has shifted into a meaningfully higher range, with annualized inflation running at roughly 4% this decade — more than double the pace of the prior decade. In our view, various factors including event-driven spikes, such as COVID and energy-driven supply shocks, as well as deglobalization, suggest that inflation is likely to remain structurally higher than it was in the years preceding COVID.
As inflation has moved higher, real assets have meaningfully outperformed. Real assets have generated annualized returns of 12.8% this decade, compared with approximately 7% for a traditional 60/40 portfolio, while returns for real assets are roughly three times the level achieved in the 2010s. We believe this relative outperformance reflects more than a short-term cyclical adjustment and instead points to a long-term trend.
Importantly, the case for real assets is not driven by inflation alone. We also see support from a durable capital expenditure cycle reinforced by several powerful secular trends, including infrastructure investment, increased defense spending, onshoring across industries and the continued buildout of artificial intelligence-related capacity.
Given these factors, we believe it’s important for investors to review their portfolio mix and consider including real assets as a way to enhance diversification, improve return potential and position for a structurally higher inflation environment.
All investments involve risk, including the possible loss of principal. Certain investments have specific or unique risks that should be considered along with the objectives, fees, and expenses before investing.
Asset allocation and diversification cannot ensure a profit or protect against a loss.
Traditional 60/40 Portfolio: An investment portfolio that allocates 60% to stocks and 40% to bonds. This approach is commonly used to balance growth potential from equities with income and diversification from fixed income investments. Investors cannot invest directly in a portfolio allocation. Real Assets: Physical or tangible assets whose value is often linked to economic activity and inflation. Examples include real estate, infrastructure, commodities and natural resources. Investors may use real assets to help diversify portfolios and potentially provide a hedge against inflation.
MSCI ACWI (All Country World Index): An index that measures the performance of large- and mid-cap stocks across developed and emerging markets worldwide, providing broad exposure to global equity markets. Bloomberg U.S. Aggregate Bond Index: A broad benchmark for the U.S. investment-grade bond market, including government, corporate, mortgage-backed, and asset-backed securities. Bloomberg Commodity Index (BCOM): An index designed to provide diversified exposure to commodity markets through futures contracts across sectors including energy, metals, and agriculture. S&P Global Infrastructure Index: An index that measures the performance of publicly traded companies involved in infrastructure-related businesses, including utilities, transportation, and energy infrastructure. FTSE EPRA/Nareit U.S. Index: An index that tracks the performance of publicly traded U.S. real estate investment trusts (REITs) and real estate companies. It is designed to represent the U.S. listed real estate market. Investors cannot invest directly in any index.
This material has been provided for informational purposes only and should not be construed as investment advice or a recommendation of any particular investment product, strategy, investment manager or account arrangement, and should not serve as a primary basis for investment decisions. Prospective investors should consult a legal, tax or financial professional in order to determine whether any investment product, strategy or service is appropriate for their particular circumstances.
Views expressed are those of the author stated and do not reflect views of other managers or the firm overall. Views are current as of the date of this publication and subject to change. This information contains projections or other forward-looking statements regarding future events, targets or expectations, and is only current as of the date indicated. There is no assurance that such events or expectations will be achieved, and actual results may be significantly different from that shown here. The information is based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. References to specific securities, asset classes and financial markets are for illustrative purposes only and are not intended to be and should not be interpreted as recommendations. Information contained herein has been obtained from sources believed to be reliable but not guaranteed. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission.
BNY Investments is the brand name for the investment management business of BNY and its investment firm affiliates worldwide. BNY is the corporate brand of The Bank of New York Mellon Corporation and may be used to reference the corporation as a whole or its various subsidiaries generally.
NOT FDIC INSURED | NO BANK GUARANTEE | MAY LOSE VALUE
MARK-995014-2026-09-01