Bitcoin Expected to Outperform Major Assets in Annual Return Forecast

JPMorgan Asset Management's first long-term forecast for Bitcoin estimates an annual compound return of 10% over the next 10 to 15 years. This figure surpasses predictions for large U.S. stocks, REITs, and gold, making it the highest among the compared assets.

This Bitcoin forecast is included in the company's "2027 Long-Term Capital Market Outlook" published on October 19. This is the 31st annual edition, modeling expected returns over 10 to 15 years for over 200 asset classes to inform strategic investment planning.

JPMorgan predicts a 10% annual compound return for Bitcoin, while large U.S. stocks are estimated at 7.5%, U.S. REITs at 8.2%, and gold at 5.5%. The forecast for Bitcoin exceeds large U.S. stocks by 2.5 percentage points, REITs by 1.8 percentage points, and gold by 4.5 percentage points.

JPMorgan "2027 Long-Term Capital Market Outlook"

The comparative materials indicate that the expected return for U.S. small-cap stocks is 7.7%. Matt Hogan, Chief Investment Officer at Bitwise, who highlighted this forecast, positioned Bitcoin as the asset with the highest expected return. However, this is his interpretation of the numbers, and JPMorgan's publication reflects model estimates rather than short-term market forecasts.

This forecast aligns with the trend of traditional financial institutions expanding their involvement in digital assets. JPMorgan's activities related to Ethereum for institutional investors are one example of the bank's expanding crypto asset-related business.

10% Return Forecast Accompanied by 55% Volatility

The return forecast comes with significant risk estimates. JPMorgan assumes Bitcoin's annual volatility to be 55%, nearly three times that of large U.S. stocks at about 18% and gold at 17.2%.

The report states that Bitcoin's arithmetic average return is 20.9% per year. The arithmetic average return is a simple average of annual results. In contrast, the compound return reflects the impact of price increases and decreases over multiple periods, making the 10% figure more relevant for understanding how asset value accumulates over time.

For assets with significant price movements, there can be substantial differences between these metrics. If a loss occurs, the principal decreases, and recovering that loss through subsequent gains requires a larger return. Assuming a constant growth of 10% per year, an investment would grow approximately 2.59 times in 10 years and about 4.18 times in 15 years.

The difference between the high expected return and the actual compounded return is crucial for interpreting this outlook. Bitcoin's risk characteristics are linked to a broader macro environment, including the relationship with real interest rates on U.S. Treasury bonds, which can influence demand for risk assets and stores of value.

Why Bitcoin Is Not Included in JPMorgan's Core Allocation Model

JPMorgan has not included Bitcoin in its primary covariance matrix used for long-term portfolio construction. Instead, it employs a smaller separate matrix that combines Bitcoin with some publicly traded assets.

The covariance matrix estimates how asset returns correlate with each other, allowing portfolio managers to assess diversification effects and complex risks. JPMorgan cites Bitcoin's high volatility and unstable correlation with traditional assets as barriers to including it in the main model.

While this forecast indicates Bitcoin's model-based returns, it does not recommend a fixed allocation. This distinction is important for institutional investors in portfolio construction. Even if an asset has a high expected return, if the relationship with risk fluctuates, it may be challenging to incorporate it into a strategic asset allocation.

This challenge is also related to the changing allocation behavior of institutional investors, including periods of continued outflows from Bitcoin ETFs. While fund flows and long-term forecasts measure different aspects, both serve as considerations for institutional investors when determining exposure and investment vehicles.

For comparison, JPMorgan predicts an annual return of 7% for a portfolio consisting of 60% U.S. dollar-denominated equities and 40% bonds over the same period. A portfolio that includes 30% diversified alternative assets could potentially reach 7.5%, depending on its composition.

Asset management firms are incorporating broader outlooks, including productivity gains from artificial intelligence (AI), corporate profitability, and rising bond yields. The forecasts utilize information obtained by September 30, 2026, and are updated annually for long-term planning purposes.

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