Monthly economic outlook

Our investment and economic outlook for December 2022

November 28, 2022

Asset-class return outlooks
A table presents Vanguard’s expectations for the ranges of annualized returns, as well as median levels of volatility, for nine classes of equity securities, eights classes of fixed income securities, and the rate of U.S. inflation. All of the projections are based on the September 30, 2022, running of our Capital Markets Model. For equities, the projections are: U.S. equities, 4.7% to 6.7% returns and 17.4% volatility; U.S. value, 4.7% to 6.7% returns and 19.8% volatility; U.S. growth, 3.1% to 5.1% returns and 18.6% volatility; U.S. large-cap, 4.7% to 6.7% returns and 17.1% volatility; U.S. small-cap, 5.0% to 7.0% returns and 22.9% volatility; U.S. real estate investment trusts, 4.9% to 6.9% returns and 20.1% volatility; global equities excluding the United States (unhedged), 7.4% to 9.4% returns and 18.8% volatility; global ex-U.S. developed markets equities (unhedged), 7.2% to 9.2% returns and 17.0% volatility; and emerging markets equities (unhedged), 7.0% to 9.0% returns and 26.4% volatility.
 A table presents Vanguard’s expectations for the ranges of annualized returns, as well as median levels of volatility, for nine classes of equity securities, eights classes of fixed income securities, and the rate of U.S. inflation. All of the projections are based on the September 30, 2022, running of our Capital Markets Model. For fixed income securities, the projections are: U.S. aggregate bonds, 4.1% to 5.1% returns and 5.6% volatility; U.S. Treasury bonds, 3.7% to 4.7% returns and 5.8% volatility; U.S. credit bonds, 4.7% to 5.7% returns and 5.3% volatility; U.S. high-yield corporate bonds, 6.6% to 7.6% returns and 10.4% volatility; U.S. Treasury Inflation-Protected Securities, 3.2% to 4.2% returns and 5.0% volatility; U.S. cash, 3.4% to 4.4% returns and 1.4% volatility; global bonds ex-U.S. (hedged), 4.0% to 5.0% returns and 4.4% volatility; and emerging markets sovereign bonds, 6.4% to 7.4% returns and 11.0% volatility. The rate of U.S. inflation is forecast at 2.0% to 3.0%, with 2.3% volatility.
Region-by-region outlook

United States

Recession in 2023 is now Vanguard's base case

Near-team recession risk is elevated across major developed markets

The U.S., euro area, and the U.K. all face a 90% probability of recession by the end of 2023, according to Vanguard.  Key drivers and risks for the U.S. include the Federal Reserve tightening path and inflation eroding consumer purchasing power. For the euro area, drivers and key risks include the Ukraine war impact, including the potential effects of an energy crisis; inflation eroding consumer purchasing power; and the European Central Bank tightening path. For the U.K., drivers and key risks include the Bank of England tightening path and inflation eroding consumer purchasing power.

Euro area

China

Emerging markets

The Fed's next steps will hinge on inflation data
Services prices accelerate even as goods prices come down
Look for employment growth to decline in the first quarter
Market perspectives for December 2022
Vanguard Information and Insights

Subscribe to Economics & markets.

Get Vanguard news, insights, and timely analysis on the market, delivered straight to your inbox.

Read our privacy policy to learn about how we keep personal information private.

* Indicates a required field

Vanguard Information and Insights

Thank you for subscribing to Economics & markets.

You'll be notified when new content is published, but will only ever receive one email a day from Vanguard Insights.

Vanguard logo

Vanguard is the trusted name in investing. Since our founding in 1975, we've put investors first.