Delta Economic Scenarios
Wealth & Security Planners
Probability-weighted return forecasts
September 2025
Base Case - Muddle Through
The developed world grows slowly, largely due to weak demographics. Corporate profits grow much the same as usual, inflation and interest rates remain low. Emerging markets continue strong economic growth. Australia grows somewhat slower than usual. The resources boom ends. Sometime over the next decade, most economies experience a sharp V-shaped recession. There is a slight chance the world experiences a couple of recessions.
Back to the Old Normal
We return to the great moderation - Cash rates back to 2% to 3% and inflation around 2.5%, GDP growth at around 3% per annum growth rates and PE ratios back to 16 to 18 times earnings.
Recession
Most of the developed world, including Australia, experiences little or no growth for the decade. Inflation and interest rates are low, and profit growth is negative as companies struggle to maintain profit margins. PE ratios fall to low levels.
Boom
Governments reject calls for austerity and engage in expansionary spending. Confidence returns and economic growth picks up worldwide. Budgets come back into balance as taxes increase with earnings. A brief burst of higher inflation is calmed by moderate monetary and fiscal tightening. Emerging market growth accelerates, profits grow rapidly, commodity prices recover.
Stagflation
The benchmark is the 1970s “ high inflation, very high interest rates, sluggish growth and low EPS growth. PE ratios are also low. This condition hits the majority of the developed world.
Western Recession - Not Australia
The world divides into two groups: those struggling under high government debt; and those with low debt and deficits. For the developed world, the scenario is as per the Recession scenario above. For Australia and the emerging markets, it looks like the Base case/Muddle through scenario.
Wither Australia
The rest of the world follows the Base case/Muddle through scenario while Australia experiences little or no growth, falling EPS, and low PE ratios.
Depression
The roadmap is the Great Depression of the 1930s. Real economic growth is negative, interest rates very low, earnings collapse, and PE ratios fall. This scenario strikes all economies including emerging markets.
Hyper-inflation
Much of the world experiences hyperinflation such as was seen in Weimar Germany in the 1930s. Property maintains value but equities and paper-based assets are essentially wiped out in real terms.
Why Delta's Dynamic Asset Allocation:
Your Advantage in All Market Conditions
Many standard long-term portfolio benchmarks and Strategic Asset Allocation (SAA) approaches primarily model only the most common economic outcomes, often focusing on central probabilities (e.g., 66% or 75% likelihood).
This narrow focus can leave investors exposed to unforeseen risks, particularly when markets appear 'Fully Priced' or 'Overpriced' and could face prolonged periods of underperformance.
Delta's Dynamic Asset Allocation (DAA) methodology stands apart. We rigorously integrate a comprehensive range of economic scenarios, including less probable but impactful 'tail risk' events like depressions or severe stagflation.
By anticipating and modeling these wider possibilities, even those with probabilities as low as <1.0%, we build more resilient portfolios designed to navigate the full spectrum of market conditions, not just the expected ones.
This commitment to deep reasoning and comprehensive analysis ensures our advice is nuanced and robust, preparing you for all eventualities.
Legend & Important Notes
Return Ranges: The stated range of returns indicates that 75% of the Monte Carlo simulations for that scenario produced returns within this range. All returns are 10-year nominal per annum unless otherwise specified.
Important Disclaimers and Disclosures
General Advice Warning: This document contains general information only and has been prepared without taking into account your objectives, financial situation, or needs. Before acting on any advice, you should consider the appropriateness of the advice having regard to your own objectives, financial situation, and needs. You should obtain and consider the relevant Product Disclosure Statement (PDS) and seek the assistance of an authorised financial adviser before making any decision regarding any products or strategies mentioned herein.
Source Attribution: The scenario analysis and economic forecasts presented in this document are derived from the Delta Dynamic Asset Allocation Handbook (September 2025), published by Delta Portfolios Pty Ltd ABN 60 688 845 150, a Corporate Authorised Representative of Delta Research & Advisory Pty Ltd ABN 43 155 969 163 AFSL 420093. This material is used under licence from Portfolio Construction Forum Holdings Pty Ltd.
No Guarantee of Returns: Past performance is not a reliable indicator of future performance. The scenarios and return forecasts presented are estimates based on various economic assumptions and modelling techniques. Actual returns may differ materially from those forecasted. There is no guarantee that any investment strategy will achieve its objectives or that any investor will make a profit or avoid losses.
Risk Disclosure: All investments carry risk. Different investment strategies have different risk profiles and may not be suitable for all investors. The value of investments and the income from them can go down as well as up, and investors may not get back the amount originally invested. Currency fluctuations may also affect the value of investments.
Not Personal Advice: The information in this document does not constitute personal financial product advice. Any advice contained in this document is general advice only and does not take into account any person's particular investment objectives, financial situation, or needs. Before making any investment decision, you should assess whether the information is appropriate for you and consider talking to a financial adviser.
Accuracy and Completeness: While every effort has been made to ensure the accuracy of the information contained in this document, neither WSP Financial Planning nor any of its representatives warrant the accuracy or completeness of the information. The information is subject to change without notice and WSP Financial Planning is under no obligation to update this document.
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Professional Advice: You should seek professional financial, legal, taxation, and/or accounting advice tailored to your specific circumstances before acting on any information contained in this document.
Document Date: This document was prepared in October 2025 based on information available at that time. Economic conditions, market circumstances, and regulatory requirements may have changed since this date.
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