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Economic outlook from Vanguard's Joe Davis, 2019 and beyond

2018-12-11, Michael Thompson

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Economic outlook from Vanguard's Joe Davis, 2019 and beyond

Joe Davis spoke on December 10, 2018 about his team’s global economic outlook. While I don’t believe anyone can give very definitive predictions in this realm, he and his team are among the few that I believe are worth listening to. What follows is a very brief synopsis of what he had to say, focused on potential impacts to your investment strategy and returns. For more detailed information, refer to their publication here.

Main notes

  • US stock market returns are expected to be in the 3-5% range for the next decade (less than half of the returns we experienced in the last decade).
  • Global stocks excluding the US are expected to return significantly more, around 6-8%. This is primarily due to an overpriced U.S. market at this time (NOT due to an expected recession).
  • Joe Davis and his team expect the Fed to raise interest rates only 2 times in 2019, not the 4 currently anticipated. They expect interest rates to near 3% in 2019, in the summer.
  • The expected return for U.S. credit bonds is 3-5%, 3.5-5.5% for high yield corporate bonds.


The team expects the recent volatility in US stocks to continue through 2019. While a recession is unlikely by their estimate, they do not expect the high equity returns (over 10%) seen in the last several years. This sentiment is shared by many prominent economists – expect something more like 3-5% per year over the next several years. While they expect the US economy to be one of the best performing, they believe returns in other markets may be superior (primarily due to being priced cheaper at this time). Indeed, they attribute the recent losses in the US market to overpriced stocks (stock prices growing faster than business fundamentals for the last several years).

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