Vanguard’s Economic and Investment Outlook

Vanguard

Joseph Davis

Research

32 Pages

Vanguard examines how structural deceleration, debt deleveraging, and diverging central bank policies could shape markets in 2016. The paper argues the world was moving toward slower but healthier growth, while warning China’s slowdown and compressed risk premiums could leave investors facing weaker long term returns.

Key Takeaways

Growth Convergence Shift: Developed economies were projected to contribute their highest share of global growth in nearly 20 years as U.S. trend GDP growth stabilized around 2.1% through 2020.
China Slowdown Risks: Vanguard expected China’s growth to slow from 10.0% during 1990–2007 to 6.3% between 2016–2020, calling debt deleveraging the largest downside risk for global markets.
Dovish Tightening Outlook: The Federal Reserve was expected to pause rates near 1%, while Vanguard projected U.S. equities and bonds would deliver their most guarded long term outlook since 2006.
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