Over the coming weeks, we’ll be posting summaries of economic and market outlook reports from the major firms. First up: Vanguard.
- World economic growth will remain frustratingly fragile. The global economy will ultimately converge over time toward a more balanced, unlevered, and healthier equilibrium, once the debt-deleveraging cycle in the global private sector is complete.
- The high-growth “goldilocks” era enjoyed by many emerging markets over the past 15 years is over.
- Don’t expect a Chinese recession in the near term, but China’s investment slowdown represents the greatest downside risk.
- The growth outlook for developed markets remains modest, but steady. As a result, the developed economies of the United States and Europe should contribute their highest relative percentage to global growth in nearly two decades.
- Policymakers are likely to continue struggling to achieve 2% inflation over the medium term.
- The U.S. Federal Reserve is likely to pursue a “dovish tightening” cycle. There is a high likelihood of an extended pause in interest rates at, say, 1%. That opens the door for balance-sheet normalization and leaves the inflation-adjusted federal funds rate negative through 2017.
- Elsewhere, further monetary stimulus is highly likely.
- Bonds: The return outlook for fixed income remains positive, yet muted.
- Stocks: After several years of suggesting that low economic growth need not equate to poor equity returns, our medium-run outlook for global equities remains guarded in the 6%–8% range.
Read more here.