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Sunday, September 24, 2023

A midyear update to our 2021 economic outlook

Economic recoveries from the COVID-19 pandemic have been rapid and impressive. This video highlights our views on global economies and how they’ve changed since the start of 2021.

Learn more about our economic and market views at midyear.


In our 2021 economic and market outlook, Vanguard discussed the critical nature of COVID-19 health outcomes. We assumed that an effective vaccine would emerge, but we emphasized that recovery would vary across industries and regions.

Economic recoveries have been rapid and impressive, as we foreshadowed, especially where vaccinations have reached the most people.

Our revised full-year GDP growth forecasts reflect how far we’ve climbed back from pandemic depths. Several are upgrades from the start of 2021, and a few are downgrades, reflecting the challenges ahead and a wide range of potential outcomes.

Demand for goods and services is rising as economies reopen, especially in the United States. Supply shortages have helped push up prices.

We foresee core inflation persisting above the Federal Reserve’s target this year in the United States, and moving toward targets in other developed markets. Inflation will remain an important theme into 2022.

Though central banks may slow their pace of asset purchases sooner than originally expected—beginning a gradual move away from accommodative monetary policy—we believe it will largely be 2023 before labor market and inflation dynamics lead them to raise policy interest rates.

Low rates helped sustain economies at the start of the pandemic. Now they support robust recoveries.
And what about our market outlook? Our 10-year annualized equity return projections are lower than at the start of the year after recent strong market gains. Today’s higher valuations make further gains harder to come by.

The news is better for fixed income investors, with higher market interest rates broadly pushing up our expectations for 10-year returns.

Look to Vanguard for insights that put long-term market and economic trends in perspective.

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