Economics and markets

What slowing global trade growth means for asset prices

October 10, 2021

1The average annual S&P 500 Index price return from 1990 to 2018 was 7.4%. Three factors make up this return: valuation expansion/contraction (dollar paid per dollar of earnings), earnings growth from revenue growth, and earnings growth from ratio of earnings to revenue (profit margins). Contributions from these factors were 0.8%, 3.7%, and 2.9%, respectively.

Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.

The illustration plots global trade growth starting in 1992, including a sharp contraction at the time of the 2008 global financial crisis, and continuing with Vanguard’s projections into the 2030s under three scenarios. We believe that Scenario 2, a “slowbalization” scenario in which trade grows at a pace between that of a pre-global financial crisis globalization wave and that of a post-global financial crisis trade reversal, is the most likely outcome. Only the post-crisis scenario results in a contraction in global trade growth in the coming decade.
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