December 10, 2025 AI’s rapid evolution has increased its potential to become a transformative economic force, with promising implications for productivity across industries.
Overview
Economics and markets
2026 outlook: Economic upside, stock market downside
December 10, 2025 AI’s rapid evolution has increased its potential to become a transformative economic force, with promising implications for productivity across industries. Adoption is accelerating, and while today’s leaders dominate headlines, tomorrow’s winners may look very different. The 2026 Vanguard economic and market outlook (VEMO) delves into potential implications. Despite strong near-term earnings expectations for hyperscalers—the firms behind massive AI investments—we believe the best investment opportunities will emerge outside this sector. Our capital markets projections show that the strongest risk-return profiles across public investments over the coming five to 10 years are, in order: high-quality U.S. fixed income, U.S. value-oriented equities, and non-U.S. developed markets equities. We expect returns for U.S. stocks—particularly growth stocks—to be muted over the next five to 10 years. In contrast, bonds remain attractive, underpinning our VEMO portfolio allocation of 40% stocks and 60% bonds. The leading investment opportunities are both offensive and defensive, making sense whether AI changes how we live or falls short and government deficits dominate the investing landscape. Related Links Vanguard’s economic and market views Dec 10, 2025 Dec 10, 2025 Our economic outlook for the United States Dec 10, 2025 Dec 10, 2025 Our U.S. return forecasts Dec 10, 2025 Dec 10, 2025 Notes: All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk. Investments in stocks and bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk. These risks are especially high in emerging markets. Vanguard Information and Insights Subscribe to Vanguard. Get Vanguard news, insights, and timely analysis on the market, delivered straight to your inbox. Read our online privacy notice to learn about how we keep personal information private. You have certain cookies disabled on the Vanguard site. In order to watch videos on this site, you must agree to the use of cookies provided by YouTube. Click here to permit these cookies and watch the videos.
