Scenario Lab

Understand risks that history cannot measure

Statistical risk measures tell you how markets have behaved. Scenario Lab lets you explore how they could behave when the economic environment changes.

Scenario Lab lets allocators define the future they are worried about - weaker growth, persistent inflation, higher real rates, geopolitical disruption, changing risk premia - and trace how that environment translates into asset and portfolio impacts.

Frontier AI Breakthroughs

5Y · Sep 26

Successive frontier model releases treated as news about the pace of AI capability progress.

Soft Landing

3Y · Jun 25

Broad-based improvement: moderating inflation, resilient growth, easing central banks, favourable risk-asset environment.

US Fiscal Expansion

30Y · Nov 25

Sustained widening of the US fiscal impulse; growth/inflation expectations lift and Treasury supply rises.

Easing Cycle

5Y · Feb 26

Central banks ease without activity collapse; yields fall, earnings improve, premiums compress.

Front-loaded Earnings Boom

5Y · Jul 26

Strong earnings burst mistaken for productivity regime; eventually disappoints and premiums reverse.

Melt-up

3Y · Oct 25

Positioning squeeze drives valuations higher without fundamentals; eventual unwind as squeeze fades.

Productivity Boom

5Y · Apr 25

Genuine US productivity improvement; strong earnings, rising neutral rates, gradual global diffusion.

Reflation Boom

3Y · Aug 26

Broad expansion lifts demand/earnings; equity premiums compress, inflation and yields rise as the boom matures.

AI Disappoints

1Y · May 26

AI progress stalls due to technical/cost hurdles; corporate AI investment retrenches, sharp correction in AI-linked sectors.

Central Bank Politicisation

10Y · Jan 26

Monetary policy politicised under fiscal pressure; inflation de-anchors, real rates compressed, markets reprice premiums.

Fiscal Dominance

30Y · Aug 25

Joint fiscal-credibility and central-bank politicisation shock; debt monetisation risk, rising term premia, de-anchoring inflation.

Geopolitical Escalation

5Y · Dec 25

Broad geopolitical deterioration with regional conflicts and strategic competition; recurring supply disruptions and higher risk premiums.

Sovereign Fiscal Stress

10Y · Sep 25

Sharp decline in fiscal sustainability confidence; higher sovereign yields, currency volatility, and tighter monetary conditions.

Trade Conflict & Decoupling

3Y · Apr 26

Progressive global decoupling with escalating tariffs; supply-side shocks reduce growth while central banks contain inflation.

Demand Shock

3Y · Mar 25

Global demand downturn starting in the US; recession risk rises, yields fall, equity/liquidity premiums spike.

Hard Landing

5Y · Oct 26

Downturn initially looks conventional but deepens; cancelled investment and labour-market damage create lasting growth scars.

Inflation Scare

5Y · Jan 25

Inflation surprise triggers tightening; yields and premiums rise, then gradually subside over several years.

Near-term Recession

5Y · Jun 26

Conventional US-led recession spreading globally; easing cycle, falling yields, rising equity/liquidity premiums with eventual recovery.

Frontier AI Breakthroughs

5Y · Sep 26

Successive frontier model releases treated as news about the pace of AI capability progress.

Soft Landing

3Y · Jun 25

Broad-based improvement: moderating inflation, resilient growth, easing central banks, favourable risk-asset environment.

US Fiscal Expansion

30Y · Nov 25

Sustained widening of the US fiscal impulse; growth/inflation expectations lift and Treasury supply rises.

Easing Cycle

5Y · Feb 26

Central banks ease without activity collapse; yields fall, earnings improve, premiums compress.

Front-loaded Earnings Boom

5Y · Jul 26

Strong earnings burst mistaken for productivity regime; eventually disappoints and premiums reverse.

Melt-up

3Y · Oct 25

Positioning squeeze drives valuations higher without fundamentals; eventual unwind as squeeze fades.

Productivity Boom

5Y · Apr 25

Genuine US productivity improvement; strong earnings, rising neutral rates, gradual global diffusion.

Reflation Boom

3Y · Aug 26

Broad expansion lifts demand/earnings; equity premiums compress, inflation and yields rise as the boom matures.

AI Disappoints

1Y · May 26

AI progress stalls due to technical/cost hurdles; corporate AI investment retrenches, sharp correction in AI-linked sectors.

Central Bank Politicisation

10Y · Jan 26

Monetary policy politicised under fiscal pressure; inflation de-anchors, real rates compressed, markets reprice premiums.

Fiscal Dominance

30Y · Aug 25

Joint fiscal-credibility and central-bank politicisation shock; debt monetisation risk, rising term premia, de-anchoring inflation.

Geopolitical Escalation

5Y · Dec 25

Broad geopolitical deterioration with regional conflicts and strategic competition; recurring supply disruptions and higher risk premiums.

Sovereign Fiscal Stress

10Y · Sep 25

Sharp decline in fiscal sustainability confidence; higher sovereign yields, currency volatility, and tighter monetary conditions.

Trade Conflict & Decoupling

3Y · Apr 26

Progressive global decoupling with escalating tariffs; supply-side shocks reduce growth while central banks contain inflation.

Demand Shock

3Y · Mar 25

Global demand downturn starting in the US; recession risk rises, yields fall, equity/liquidity premiums spike.

Hard Landing

5Y · Oct 26

Downturn initially looks conventional but deepens; cancelled investment and labour-market damage create lasting growth scars.

Inflation Scare

5Y · Jan 25

Inflation surprise triggers tightening; yields and premiums rise, then gradually subside over several years.

Near-term Recession

5Y · Jun 26

Conventional US-led recession spreading globally; easing cycle, falling yields, rising equity/liquidity premiums with eventual recovery.

Why Scenario Lab

Scenarios built differently

Our approach starts from what is already priced, expresses scenarios as changes in intuitive present-value drivers such as realised and expected growth, inflation, real rates, cash flows and risk premia, and then translates those changes consistently into asset and portfolio outcomes.

Scenario library

Scenarios built by AS

Start from a library of forward-looking scenarios developed by our research team, covering the macro risks and regime shifts most relevant to asset allocators.

Frontier AI Breakthroughs

Successive frontier model releases treated as news about the pace of AI capability progress.

Exp. return p.a.: +7.1%
Probability: 10%

Soft Landing

Broad-based improvement: moderating inflation, resilient growth, easing central banks, favourable risk-asset environment.

Exp. return p.a.: +6.4%
Probability: 25%

US Fiscal Expansion

Sustained widening of the US fiscal impulse; growth/inflation expectations lift and Treasury supply rises.

Exp. return p.a.: +5.9%
Probability: 15%

Easing Cycle

Central banks ease without activity collapse; yields fall, earnings improve, premiums compress.

Exp. return p.a.: +6.8%
Probability: 20%

Front-loaded Earnings Boom

Strong earnings burst mistaken for productivity regime; eventually disappoints and premiums reverse.

Exp. return p.a.: +5.2%
Probability: 8%

Melt-up

Positioning squeeze drives valuations higher without fundamentals; eventual unwind as squeeze fades.

Exp. return p.a.: +8.9%
Probability: 6%

Productivity Boom

Genuine US productivity improvement; strong earnings, rising neutral rates, gradual global diffusion.

Exp. return p.a.: +7.4%
Probability: 10%

Reflation Boom

Broad expansion lifts demand/earnings; equity premiums compress, inflation and yields rise as the boom matures.

Exp. return p.a.: +6.1%
Probability: 12%

Soft Landing

Inflation falls without recession; progressive confirmation of landing, falling yields, and compressing premiums.

Exp. return p.a.: +6.6%
Probability: 22%

Frontier AI Breakthroughs

Successive frontier model releases treated as news about the pace of AI capability progress.

Exp. return p.a.: +7.1%
Probability: 10%

Soft Landing

Broad-based improvement: moderating inflation, resilient growth, easing central banks, favourable risk-asset environment.

Exp. return p.a.: +6.4%
Probability: 25%

US Fiscal Expansion

Sustained widening of the US fiscal impulse; growth/inflation expectations lift and Treasury supply rises.

Exp. return p.a.: +5.9%
Probability: 15%

Easing Cycle

Central banks ease without activity collapse; yields fall, earnings improve, premiums compress.

Exp. return p.a.: +6.8%
Probability: 20%

Front-loaded Earnings Boom

Strong earnings burst mistaken for productivity regime; eventually disappoints and premiums reverse.

Exp. return p.a.: +5.2%
Probability: 8%

Melt-up

Positioning squeeze drives valuations higher without fundamentals; eventual unwind as squeeze fades.

Exp. return p.a.: +8.9%
Probability: 6%

Productivity Boom

Genuine US productivity improvement; strong earnings, rising neutral rates, gradual global diffusion.

Exp. return p.a.: +7.4%
Probability: 10%

Reflation Boom

Broad expansion lifts demand/earnings; equity premiums compress, inflation and yields rise as the boom matures.

Exp. return p.a.: +6.1%
Probability: 12%

Soft Landing

Inflation falls without recession; progressive confirmation of landing, falling yields, and compressing premiums.

Exp. return p.a.: +6.6%
Probability: 22%

AI Disappoints

AI progress stalls due to technical/cost hurdles; corporate AI investment retrenches, sharp correction in AI-linked sectors.

Exp. return p.a.: +1.2%
Probability: 15%

Central Bank Politicisation

Monetary policy politicised under fiscal pressure; inflation de-anchors, real rates compressed, markets reprice premiums.

Exp. return p.a.: +0.8%
Probability: 8%

Fiscal Dominance

Joint fiscal-credibility and central-bank politicisation shock; debt monetisation risk, rising term premia, de-anchoring inflation.

Exp. return p.a.: −0.6%
Probability: 6%

Geopolitical Escalation

Broad geopolitical deterioration with regional conflicts and strategic competition; recurring supply disruptions and higher risk premiums.

Exp. return p.a.: +0.4%
Probability: 18%

Sovereign Fiscal Stress

Sharp decline in fiscal sustainability confidence; higher sovereign yields, currency volatility, and tighter monetary conditions.

Exp. return p.a.: −1.1%
Probability: 7%

Trade Conflict & Decoupling

Progressive global decoupling with escalating tariffs; supply-side shocks reduce growth while central banks contain inflation.

Exp. return p.a.: +1.5%
Probability: 20%

Demand Shock

Global demand downturn starting in the US; recession risk rises, yields fall, equity/liquidity premiums spike.

Exp. return p.a.: −2.4%
Probability: 10%

Hard Landing

Downturn initially looks conventional but deepens; cancelled investment and labour-market damage create lasting growth scars.

Exp. return p.a.: −4.8%
Probability: 8%

Inflation Scare

Inflation surprise triggers tightening; yields and premiums rise, then gradually subside over several years.

Exp. return p.a.: +0.9%
Probability: 14%

Near-term Recession

Conventional US-led recession spreading globally; easing cycle, falling yields, rising equity/liquidity premiums with eventual recovery.

Exp. return p.a.: −2.9%
Probability: 15%

AI Disappoints

AI progress stalls due to technical/cost hurdles; corporate AI investment retrenches, sharp correction in AI-linked sectors.

Exp. return p.a.: +1.2%
Probability: 15%

Central Bank Politicisation

Monetary policy politicised under fiscal pressure; inflation de-anchors, real rates compressed, markets reprice premiums.

Exp. return p.a.: +0.8%
Probability: 8%

Fiscal Dominance

Joint fiscal-credibility and central-bank politicisation shock; debt monetisation risk, rising term premia, de-anchoring inflation.

Exp. return p.a.: −0.6%
Probability: 6%

Geopolitical Escalation

Broad geopolitical deterioration with regional conflicts and strategic competition; recurring supply disruptions and higher risk premiums.

Exp. return p.a.: +0.4%
Probability: 18%

Sovereign Fiscal Stress

Sharp decline in fiscal sustainability confidence; higher sovereign yields, currency volatility, and tighter monetary conditions.

Exp. return p.a.: −1.1%
Probability: 7%

Trade Conflict & Decoupling

Progressive global decoupling with escalating tariffs; supply-side shocks reduce growth while central banks contain inflation.

Exp. return p.a.: +1.5%
Probability: 20%

Demand Shock

Global demand downturn starting in the US; recession risk rises, yields fall, equity/liquidity premiums spike.

Exp. return p.a.: −2.4%
Probability: 10%

Hard Landing

Downturn initially looks conventional but deepens; cancelled investment and labour-market damage create lasting growth scars.

Exp. return p.a.: −4.8%
Probability: 8%

Inflation Scare

Inflation surprise triggers tightening; yields and premiums rise, then gradually subside over several years.

Exp. return p.a.: +0.9%
Probability: 14%

Near-term Recession

Conventional US-led recession spreading globally; easing cycle, falling yields, rising equity/liquidity premiums with eventual recovery.

Exp. return p.a.: −2.9%
Probability: 15%

Frontier AI Breakthroughs

Successive frontier model releases treated as news about the pace of AI capability progress.

Exp. return p.a.: +7.1%
Probability: 10%

Soft Landing

Broad-based improvement: moderating inflation, resilient growth, easing central banks, favourable risk-asset environment.

Exp. return p.a.: +6.4%
Probability: 25%

US Fiscal Expansion

Sustained widening of the US fiscal impulse; growth/inflation expectations lift and Treasury supply rises.

Exp. return p.a.: +5.9%
Probability: 15%

Easing Cycle

Central banks ease without activity collapse; yields fall, earnings improve, premiums compress.

Exp. return p.a.: +6.8%
Probability: 20%

Front-loaded Earnings Boom

Strong earnings burst mistaken for productivity regime; eventually disappoints and premiums reverse.

Exp. return p.a.: +5.2%
Probability: 8%

Melt-up

Positioning squeeze drives valuations higher without fundamentals; eventual unwind as squeeze fades.

Exp. return p.a.: +8.9%
Probability: 6%

Productivity Boom

Genuine US productivity improvement; strong earnings, rising neutral rates, gradual global diffusion.

Exp. return p.a.: +7.4%
Probability: 10%

Reflation Boom

Broad expansion lifts demand/earnings; equity premiums compress, inflation and yields rise as the boom matures.

Exp. return p.a.: +6.1%
Probability: 12%

Soft Landing

Inflation falls without recession; progressive confirmation of landing, falling yields, and compressing premiums.

Exp. return p.a.: +6.6%
Probability: 22%

AI Disappoints

AI progress stalls due to technical/cost hurdles; corporate AI investment retrenches, sharp correction in AI-linked sectors.

Exp. return p.a.: +1.2%
Probability: 15%

Central Bank Politicisation

Monetary policy politicised under fiscal pressure; inflation de-anchors, real rates compressed, markets reprice premiums.

Exp. return p.a.: +0.8%
Probability: 8%

Fiscal Dominance

Joint fiscal-credibility and central-bank politicisation shock; debt monetisation risk, rising term premia, de-anchoring inflation.

Exp. return p.a.: −0.6%
Probability: 6%

Geopolitical Escalation

Broad geopolitical deterioration with regional conflicts and strategic competition; recurring supply disruptions and higher risk premiums.

Exp. return p.a.: +0.4%
Probability: 18%

Sovereign Fiscal Stress

Sharp decline in fiscal sustainability confidence; higher sovereign yields, currency volatility, and tighter monetary conditions.

Exp. return p.a.: −1.1%
Probability: 7%

Trade Conflict & Decoupling

Progressive global decoupling with escalating tariffs; supply-side shocks reduce growth while central banks contain inflation.

Exp. return p.a.: +1.5%
Probability: 20%

Demand Shock

Global demand downturn starting in the US; recession risk rises, yields fall, equity/liquidity premiums spike.

Exp. return p.a.: −2.4%
Probability: 10%

Hard Landing

Downturn initially looks conventional but deepens; cancelled investment and labour-market damage create lasting growth scars.

Exp. return p.a.: −4.8%
Probability: 8%

Inflation Scare

Inflation surprise triggers tightening; yields and premiums rise, then gradually subside over several years.

Exp. return p.a.: +0.9%
Probability: 14%

Near-term Recession

Conventional US-led recession spreading globally; easing cycle, falling yields, rising equity/liquidity premiums with eventual recovery.

Exp. return p.a.: −2.9%
Probability: 15%

Frontier AI Breakthroughs

Successive frontier model releases treated as news about the pace of AI capability progress.

Exp. return p.a.: +7.1%
Probability: 10%

Soft Landing

Broad-based improvement: moderating inflation, resilient growth, easing central banks, favourable risk-asset environment.

Exp. return p.a.: +6.4%
Probability: 25%

US Fiscal Expansion

Sustained widening of the US fiscal impulse; growth/inflation expectations lift and Treasury supply rises.

Exp. return p.a.: +5.9%
Probability: 15%

Easing Cycle

Central banks ease without activity collapse; yields fall, earnings improve, premiums compress.

Exp. return p.a.: +6.8%
Probability: 20%

Front-loaded Earnings Boom

Strong earnings burst mistaken for productivity regime; eventually disappoints and premiums reverse.

Exp. return p.a.: +5.2%
Probability: 8%

Melt-up

Positioning squeeze drives valuations higher without fundamentals; eventual unwind as squeeze fades.

Exp. return p.a.: +8.9%
Probability: 6%

Productivity Boom

Genuine US productivity improvement; strong earnings, rising neutral rates, gradual global diffusion.

Exp. return p.a.: +7.4%
Probability: 10%

Reflation Boom

Broad expansion lifts demand/earnings; equity premiums compress, inflation and yields rise as the boom matures.

Exp. return p.a.: +6.1%
Probability: 12%

Soft Landing

Inflation falls without recession; progressive confirmation of landing, falling yields, and compressing premiums.

Exp. return p.a.: +6.6%
Probability: 22%

AI Disappoints

AI progress stalls due to technical/cost hurdles; corporate AI investment retrenches, sharp correction in AI-linked sectors.

Exp. return p.a.: +1.2%
Probability: 15%

Central Bank Politicisation

Monetary policy politicised under fiscal pressure; inflation de-anchors, real rates compressed, markets reprice premiums.

Exp. return p.a.: +0.8%
Probability: 8%

Fiscal Dominance

Joint fiscal-credibility and central-bank politicisation shock; debt monetisation risk, rising term premia, de-anchoring inflation.

Exp. return p.a.: −0.6%
Probability: 6%

Geopolitical Escalation

Broad geopolitical deterioration with regional conflicts and strategic competition; recurring supply disruptions and higher risk premiums.

Exp. return p.a.: +0.4%
Probability: 18%

Sovereign Fiscal Stress

Sharp decline in fiscal sustainability confidence; higher sovereign yields, currency volatility, and tighter monetary conditions.

Exp. return p.a.: −1.1%
Probability: 7%

Trade Conflict & Decoupling

Progressive global decoupling with escalating tariffs; supply-side shocks reduce growth while central banks contain inflation.

Exp. return p.a.: +1.5%
Probability: 20%

Demand Shock

Global demand downturn starting in the US; recession risk rises, yields fall, equity/liquidity premiums spike.

Exp. return p.a.: −2.4%
Probability: 10%

Hard Landing

Downturn initially looks conventional but deepens; cancelled investment and labour-market damage create lasting growth scars.

Exp. return p.a.: −4.8%
Probability: 8%

Inflation Scare

Inflation surprise triggers tightening; yields and premiums rise, then gradually subside over several years.

Exp. return p.a.: +0.9%
Probability: 14%

Near-term Recession

Conventional US-led recession spreading globally; easing cycle, falling yields, rising equity/liquidity premiums with eventual recovery.

Exp. return p.a.: −2.9%
Probability: 15%

Kept up to date

Reviewed and refreshed by our investment team as markets move, so the library always reflects the most relevant risks.

Expected returns and probabilities are illustrative.

Narratives

Translate risk into key narratives

Historical estimates of volatility, VaR and drawdowns, describe the distribution of past outcomes. They do not tell you what happens if the economic regime changes.

Instead of asking only “what if markets fell 20%?”, investors can ask how a persistent growth disappointment, inflation regime shift or change in real rates would compound through assets and portfolios over time.

FAQs

Common questions about Scenario Lab

Scenario Lab is Allocation Strategy's forward-looking scenario analysis framework. It lets investors define alternative macroeconomic and market environments, translate those views into asset outcomes, and assess the implications across a portfolio.

Traditional stress tests often begin by shocking an asset return, yield or factor directly. Scenario Lab starts with the underlying economic and valuation drivers — such as growth, inflation, real rates, cash flows and risk premia — and models how those changes propagate through markets and portfolios.

Scenarios begin from current market pricing and expectations rather than simply replaying historical returns. Investors can explore how the future could differ from what markets currently expect and what that would mean for asset prices and portfolios.

Scenario Lab is designed for broad multi-asset portfolios, including public and private assets. The coverage extends across the full asset set covered in our other solutions. See the CMA page for more information.

Yes. Teams can start from scenarios developed by Allocation Strategy around important macroeconomic risks and regime shifts, then adapt them to reflect their own views.

Yes. Scenario outcomes can be incorporated directly into portfolio analysis and construction, allowing investors to assess whether an allocation remains attractive or resilient under alternative future environments. See the ATLAS page for more information.

Get in touch

Bring a forward-looking view to your allocation decisions

Talk to us about your portfolio, your benchmarks and the decisions in front of you.

Insights

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Using discounted cash flow logic at a macro level.

Understand risks that history cannot measure

Scenarios built differently

What’s priced in1

Forward-looking2

Multi-year horizons3

Scenarios built by AS

Translate risk into key narratives

Common questions about Scenario Lab

What is Scenario Lab?

How is Scenario Lab different from traditional stress testing?

What makes the scenarios forward-looking?

What assets can be analysed?

Does Allocation Strategy provide pre-built scenarios?

Can scenarios be used for portfolio construction?

Bring a forward-looking view to your allocation decisions

Related Insights

Moving beyond market episodes to build scenarios for asset allocation

Designing macro-resilient portfolios in a changing world

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Forward-looking assessment of risk and return