Vanguard Economic and Market Outlook for 2026

Key points

AI investment drives growth

AI is powering US corporate earnings and is expected to be the main driver of productivity and economic expansion over the next five years.

Divergence from consensus

We see an 80% chance that economic growth will diverge from consensus forecasts, with AI investment as the critical swing factor.

US outperformance likely

The US is positioned for stronger growth (up to 3% real GDP possible), supported by AI and fiscal stimulus. Meanwhile, the UK and euro area face more muted prospects.

Asset class outlook

Over the next 5 to 10 years, we project the strongest risk-return profiles for high-quality fixed income, US value equities and ex-US developed market equities.

Risk and volatility rising

Despite rational exuberance, risks are mounting, especially in US growth stocks. This is due to high expectations and sector volatility and makes selectivity and diversification essential.

Watch our video summary

Joe Davis, Vanguard’s Global Chief Economist, explains how AI is shaping our outlook for 2026 and beyond.

Transcript

Joe Davis: In 2026, AI investment is likely to accelerate and continue to transform the global economy. That sort of investment in businesses and companies has the prospect to have slightly higher than expected economic growth in the United States and some other leading markets. This should stabilise the labour market and could even lead to somewhat fewer than expected interest rate cuts from the Federal Reserve.

Our outlook for the financial markets is also generally constructive, but with one important nuance. AI related stocks, particularly in the United States, have done astoundingly well over the past several years. But our study and analysis of financial market history reveals one compelling thesis, and that is over time, areas outside of the technology field will start to outperform more strongly as they benefit from the technology itself. So, areas such as value stocks in the United States and investments outside of the United States should increasingly offer attractive returns.

And then finally, areas such as fixed income, which provide not only higher income expected as interest rates should remain above the rate of inflation but also provide just a modest defensive posture should this sort of exuberance continue to the sky.

Our investment products

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Fixed income

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Multi-asset

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ETFs

In 2025, we expanded our ETF range and cut fees across 13 exposures. Portfolio constructors now have even more tools available as they weigh up allocations for 2026.

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Money markets

Cash should not be idle – it can serve as a strategic asset in portfolios, especially in uncertain times. Learn how to get your cash working in a money market fund.

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Read our outlook resources

Our full report and supporting materials are available to read and download. They can also help guide conversations with your clients.

Download the full report for our views on the macro environment and the outlook for bond and equity markets.

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Client-friendly summary of our 2026 outlook

Here are the key points to give you or your clients an overview of our outlook for 2026.

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On demand

45 minutes

Vanguard 2026 economic and market outlook

Webinar

Our economists share their views on what lies ahead for global markets in 2026.

Jumana Saleheen and Shaan Raithatha

Watch on-demand

Oct 1, 2026

5 min

Investment risk information

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Any projections should be regarded as hypothetical in nature and do not reflect or guarantee future results.

Important information

For professional investors only (as defined under the MiFID II Directive) investing for their own account (including management companies (fund of funds) and professional clients investing on behalf of their discretionary clients). In Switzerland for professional investors only. Not to be distributed to the public.

The information contained herein is not to be regarded as an offer to buy or sell or the solicitation of any offer to buy or sell securities in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. The information does not constitute legal, tax, or investment advice. You must not, therefore, rely on it when making any investment decisions.

The information contained herein is for educational purposes only and is not a recommendation or solicitation to buy or sell investments.

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Issued in Switzerland by Vanguard Investments Switzerland GmbH.

Issued by Vanguard Asset Management, Limited which is authorised and regulated in the UK by the Financial Conduct Authority.

AI exuberance: Economic upside, stock market downside