Updated with correction
Wilshire Consulting lowered its return assumption on high-yield bonds and domestic equities based on changes in the market.
The firm now sees high-yield bond returns of 6.75%, down from the 8.5% prediction at the start of 2009, according to a midyear update to its annual Asset Allocation Return and Risk Assumptions report. It also lowered its estimate for U.S. stocks to 8% from 8.5%.
Steve Foresti, managing director and head of investment research at Wilshire, said the outlook for high yield was unusually high, especially in comparison to stocks. But the estimates came down as the market for high-yield bonds rallied.
“The relative relationship is much more typical now than what was baked into the beginning of year,” he said.
Wilshire also revised its long-term inflation forecast to 1.75% from 1.5% to mirror break-even inflation on 10-year Treasuries.
“Although the inflation picture is far from clear, sustained deflation appears to be less of a concern than previously thought,” the firm said in its report.