Vanguard perspective

A midyear update on our economic and market outlook

July 20, 2021



1 Herd immunity is the point at which a virus’ spread becomes harder because numbers of vaccinated and already-infected people have reached a certain threshold.

Percentage of population with at least one vaccine dose
Line chart shows the percentage of certain populations who have received at least one COVID-19 vaccine dose. It shows actual percentages from December 2020 through June 2021 and projections thereafter through December 2021. The chart shows that more than 50% of people in the United Kingdom, the United States, and Canada had at least one dose by June 2021, compared with less than 40% of people in China, the European Union, Mexico, Australia, and the world overall. Our projections show that in all regions at least 60% of individuals will have had at least one dose by the end of 2021. No projections are shown for Canada or Mexico.

Inflation: Up, up … but not away in 2021
Line chart shows actual monthly year-over-year percentage changes in U.S. core CPI from January 1995 through May 2021. It also shows projected monthly year-over-year percentage changes under two scenarios from June 2021 through December 2022. The first scenario is Vanguard’s baseline forecast for U.S. core CPI, and the second is Vanguard’s “go big” upside forecast for U.S. core CPI. A horizontal band shows the legacy inflation target range of 1.75% to 2.25% that the Federal Reserve abandoned in August 2020 in favor of a policy of average inflation targeting, which allows inflation to surpass that level for some time. The chart shows that actual U.S. core CPI spiked to almost 3% in April 2021. The projection of Vanguard’s baseline forecast scenario shows U.S. core CPI exceeding 3% at times in 2021 but falling below that in 2022. The projection of Vanguard’s “go big” upside forecast scenario shows U.S. core CPI remaining consistently above 3% in 2021 before moderating in 2022.
Headline inflation in the euro area and U.K. is likely to moderate in 2022
Line chart shows actual monthly year-over-year percentage changes in headline CPI from January 2019 through May 2021 for the euro area and the UK. For both regions, it also shows monthly year-over-year percentage change projections in headline CPI from June 2021 through December 2022. The actual changes for both regions show that headline CPI climbed to above 2% in May 2021. The projections show headline CPI continuing to rise in both regions toward the end of 2021 and then moderating in 2022.

Here are our current 10-year annualized return forecasts:


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