Vanguard’s Latest Economic and Market Update

Vanguard recently came out with their market perspective update, and for US equities overall they are projecting a rate of return of 4.1%-6.1% annualized over the next decade. Along with those numbers, they are showing about 17% volatility. We also see that value stocks are projected between 4.4%-6.4% with volatility at 19%.

The update predicts a 2%-3% inflation rate over the next 10 years. Currently, we are above 5.4% inflation rate, which means Vanguard seems to think this is somewhat temporary. They also believe that there won’t be a recession this year. Currently, there’s a 25% chance of a recession in 2022. However, for 2023 it is estimated to be a 65% chance that the US will be in a recession.

Rate cuts in 2023 will be unlikely because more and more employers are starting to pay their employees more. The US also has a low unemployment rate currently with two jobs for every person looking. This means that the FED might have to keep inflating interest rates beyond their target, which could ultimately lead to more pain for the stock market.

These predictions give us a good look into the future of the stock market and show us why things are happening the way they are. Although we can’t tell if the stock market will continue to fall, it’s good to keep in mind that we’re not investing for next year, but for the rest of our lives.

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