Vanguard economic and market outlook

Notes: We use year-over-year changes the core consumer price index (CPI) for all locations. Year-end 2023 figures are Vanguard forecasts.

Sources: Vanguard calculations, using data from the U.S. Bureau of Labor Statistics, Eurostat, and the UK Office for National Statistics accessed through Macrobond on 15 June 2023.

Outlook for growth, inflation and interest rates

We expect continued progress in the fight against inflation, with central banks having to keep interest rates in restrictive territory for longer. But inflation and monetary policy have elevated the risk of recession and we anticipate some economic weakness to come in the months ahead.

Please note that inflation forecasts are for core inflation, which excludes volatile energy and food prices. Our forecast for the United States year-end monetary policy rate reflects the low end of the Federal Reserve's federal funds target range.

Notes: Figures related to economic growth, inflation, monetary policy and unemployment rate are Vanguard forecasts for the end of 2023. Growth and inflation are comparisons with the end of the preceding year; monetary policy and unemployment rate are absolute levels.

Source: Vanguard, as of 26 June 2023.

Expected 10-year asset class returns have improved for UK investors 

British Pound

IMPORTANT: The projections and 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 31 December 2021; 31 December 2022; and 31 May 2023. Results from the model may vary with each use and over time. 

Note: Figures are based on a 2-point range around the 50th percentile of the distribution of return outcomes for equities and a 1-point range around the 50th percentile for fixed income. Indices used in VCMM calculations: UK equities: Bloomberg Equity Gilt Study from 1900 to 1964, Thomson Reuters Datastream UK Market Index from 1965 to 1969; MSCI UK thereafter; global ex-UK equities: S&P 90 Index from January 1926 to 3 March 1957; S&P 500 Index from 4 March 1957 to 1969; MSCI World ex-UK Index from 1970 to 1987; MSCI AC World ex-UK thereafter; UK aggregate bonds: Bloomberg Sterling Aggregate Bond Index; Global ex-UK bonds: Standard & Poor’s High Grade Corporate Index from 1926 to 1968, Citigroup High Grade Index from 1969 to 1972, Lehman Brothers US Long Credit AA Index from 1973 to 1975, Bloomberg US Aggregate Bond Index from 1976 to 1990, Bloomberg Global Aggregate Index from 1990 to 2001; Bloomberg Global Aggregate ex GBP Index thereafter.