Monthly economic outlook

Our investment and economic outlook for November 2022

October 27, 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 four classes of equity securities, three 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 17.6% volatility; global equities excluding the United States (unhedged), 7.5% to 9.5% returns and 19.1% volatility; global ex-U.S. developed markets equities (unhedged), 7.2% to 9.2% returns and 17.3% volatility; and emerging markets equities (unhedged), 7.0% to 9.0% returns and 27.1% volatility.
 A table presents Vanguard’s expectations for the ranges of annualized returns, as well as median levels of volatility, for four classes of equity securities, three 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 6.0% volatility; U.S. Treasury bonds, 3.7% to 4.7% returns and 6.2% volatility; global bonds ex-U.S. (hedged), 4% to 5% returns and 4.6% volatility.
Region-by-region outlook

United States

Euro area

United Kingdom

China

Emerging markets

Financial markets seek more certainty from policymakers
Rising expectations for central bank interest rates
Market expectations for Federal Reserve, European Central Bank, and Bank of England policy rates have risen significantly in 2022. Markets expect policy rates to remain above neutral rates for several years. Vanguard expects the Fed policy rate to reach a 4.75% terminal rate in the first quarter of 2023 from its current 3.25% at the high end of its target range. We expect the ECB policy rate to reach a 2.5% terminal rate in the first quarter of 2023 from its current 0.75%. We expect the Bank of England policy rate to reach a 5% terminal rate in the first quarter of 2023 from its current 2.25%.
Inflation levels continue to surprise
Strong labor numbers give the Fed more latitude
Market perspectives for November 2022
Vanguard Information and Insights

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