In June, investors expected stocks to return 5.5% over the coming 12 months. This represents a large increase from the 3.7% they expected in April and is the highest reading since the 6% return expected in December 2021. Current expectations are more than 4 percentage points higher than the low recorded in October of last year and the second-largest rise observed in the six-year history of the survey.

Investor expectations for 10-year returns didn’t budge from the 7.1% level set in April.

“Investors are saying loud and clear that they expect the current stock market rally to continue,” said Tom De Luca, a senior researcher in Vanguard’s Investor Behavior Group. “Right now, short-term optimism is higher than we’ve seen since December 2021, right before the start of the 2022 bear market.”

Investors’ expectations for average annual GDP growth over the coming three years increased by 0.2 percentage points to 3.1% in June, recovering from a slight dip in April.

Long-run GDP expectations for the coming decade remained stable at 3.8%, well above our survey’s historical average.

“Investors’ confidence in economic growth regained some momentum alongside their stock market outlook,” said Andy Reed, head of investor behavior research at Vanguard. “After running the gauntlet of bank failures, a debt ceiling crisis, and persistent inflation, investors are now anticipating a brighter outlook over the next three years.”

In June, investors believed there was a 5.1% chance that the stock market would drop by 30% or more over the coming 12 months. This was a notable decrease from two months earlier, when they put the chance of a disaster at 5.8%.

Investors gauged the odds of an economic disaster as slightly lower as well: 6.0% in June compared with 6.4% in April.  Both components of Vanguard’s Fear and Doubt Index, a part of the Investor Expectations Survey, remained near their historical average of 5.5% and well below their levels during both the COVID-19 pandemic and the 2022 bear market.

“Since our last survey, investors have seen crises averted and markets rising,” said Reed. “Good news and the start of summer corresponded with a dip in uncertainty and anxiety, bringing levels close to normal.”

Vanguard’s Investor Research & Insights team has been collecting Vanguard investor expectations for U.S. stock market returns and U.S. GDP growth since February 2017. The survey runs every other month, in February, April, June, August, October, and December. A special survey was conducted in March 2020 during the pandemic-induced market crash.

The survey poses 13 brief questions about U.S. stock market and economic growth expectations to a random sample of 2,000 Vanguard personal and 401(k) investors. It is conducted in partnership with academic researchers Stefano Giglio of the Yale School of Management, Matteo Maggiori of the Graduate School of Business, Stanford University, and Johannes Stroebel of the Stern School of Business, New York University.

The survey respondents are a random sample of U.S.-based Vanguard investors invited by email to participate. About 80% of the sample is drawn from our personal investor clients and about 20% from participants in employer-sponsored defined contribution retirement plans. To be included, investors also must have opted in to receive Vanguard statements by email, be over age 21, and have total Vanguard assets of at least $10,000. Overall, this sample group holds about $2 trillion in assets at Vanguard. We receive about 2,000 responses from investors in each period the survey is conducted.

The responses may be of use to advisors, plan sponsors, researchers, and other investors wishing to gauge current sentiment among individual households and calibrate clients’ thoughts compared with the market.

• Diving deeper into attitudes around college savings (article, issued June 2023)
• A midyear update on our economic and market outlook (article, issued June 2023)
• Well-positioned borrowers could support U.S. housing (article, issued June 2023)
• Investor pulse: Sentiment and hiring cool in April (article, issued May 2023)