May 27, 2021 | Vanguard Perspective
Our 10-year, annualized, nominal return projections, as of March 31, 2021, are shown below. Please note that the figures are based on a 1.0-point range around the rounded 50th percentile of the distribution of return outcomes for equities and a 0.5-point range around the rounded 50th percentile for fixed income.
Our outlooks for equity returns are broadly lower while our outlooks for bond returns are broadly higher compared with our outlooks based on our previous running of the VCMM, on December 31, 2020.
|Equities||Return projection||Median volatility|
|U.S. real estate investment trusts||2.4%–4.4%||19.5%|
Global equities ex-U.S. (unhedged)
|Fixed income||Return projection||Median volatility|
|U.S. aggregate bonds||1.4%–2.4%||4.5%|
|U.S. Treasury bonds||1.1%–2.1%||4.7%|
|U.S. credit bonds||1.8%–2.8%||5.7%|
|U.S. high-yield corporate bonds||2.2%–3.2%||10.2%|
|U.S. Treasury Inflation-Protected Securities||0.8%–1.8%||7.0%|
|Global bonds ex-U.S. (hedged)||1.3%–2.3%||3.8%|
|Emerging markets sovereign||2.1%–3.1%||9.9%|
These probabilistic return assumptions depend on current market conditions and, as such, may change over time.
IMPORTANT: The projections or other information generated by the Vanguard Capital Markets Model® regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Distribution of return outcomes from the VCMM are derived from 10,000 simulations for each modeled asset class. Simulations are as of March 31, 2021. Results from the model may vary with each use and over time. For more information, see the Notes section.
Source: Vanguard Investment Strategy Group.
High-frequency indicators in the United States point to strong demand for goods and services thus far in the second quarter, in line with our expectations for quarterly growth that could approach double digits, likely the strongest growth figures of the year.
The euro area experienced a double-dip recession in the first quarter, but more timely data alongside generally stronger sentiment paint a more optimistic picture of an economy that is likely growing again.
GDP in China grew by 18.3% in the first quarter compared with the first quarter of 2020, having grown 6.5% year-on-year in the fourth quarter.
Asia, the recent engine for growth in emerging markets, is now the focal point for virus transmission.
The CPI in the United States rose a greater-than-expected 0.8% in April on a seasonally adjusted basis compared with March.
If core CPI returns to trend this year …
… monthly readings of year-over-year core CPI could become elevated
At the end of the decade, we foresee rate targets of 2.5% for the Fed and the Bank of England, and a target of 1.5% for the European Central Bank—levels that would reflect neither accommodative nor restrictive monetary policy.
The unemployment rate in the United States rose to 6.1% in April as only 266,000 non-farm jobs were created, far below expectations for more than a million.