The case for real assets

Real assets should become a core portfolio allocation as scarcity, persistent inflation and valuation gaps weaken the traditional stock-and-bond regime.

• Cohen & Steers expects the next decade to bring slower real growth, stubbornly high inflation and greater volatility than the previous 10 years, reducing equity returns and making bonds less reliable as a hedge.
• The scarcity regime is supported by AI-driven data demand, deglobalization, aging populations, decarbonization and commodity underinvestment, benefiting data centers, cell towers, logistics assets, infrastructure, health care real estate, energy and natural-resource producers.
• Global real estate, listed infrastructure and natural-resource equities are described as inexpensive relative to their own history, while broad equities remain expensive; real assets also lagged equities during the 2011–2021 period.
• The firm expects 10-year nominal yields to rise because of resilient growth, sticky inflation and elevated sovereign issuance, but forecasts real yields to fall to 1.75% by year-end 2026.
• Historical analysis covering December 2002 to December 2025 finds that falling real yields combined with rising inflation breakevens produced strong absolute and relative returns for real assets; the firm's illustrative blend contains 27.5% real estate, 27.5% commodities, 15% natural-resource equities, 15% infrastructure, 10% short-duration fixed income and 5% gold.
• Real assets generated double-digit returns across virtually all categories in 2025, while the firm's outlook is above consensus on global growth, inflation and interest rates and anticipates broader economic and market participation.

Takeaway: Investors should consider a diversified real-assets allocation for inflation sensitivity, diversification and valuation support, although the historical relationships, forecasts and illustrative portfolio are not guaranteed to persist.