Vanguard Economic and Market Outlook for 2026

This report presents Vanguard's economic and market outlook for 2026, focusing on the transformative impact of artificial intelligence (AI) on productivity and economic growth. It outlines the expected growth trajectory of the U.S. economy, projecting a potential increase of up to 3% driven by AI capital investment. The report highlights the nuanced outlook for equity markets, emphasizing the risks associated with tech-heavy U.S. equities while advocating for fixed income and value stocks as more attractive investment options. The document details forecasts for various regions, including the U.S., Euro area, and China, and discusses the implications of AI investment on labor markets and inflation. It also assesses the potential risks to economic growth and the evolving landscape of capital markets, suggesting that while AI presents significant opportunities, it also introduces volatility and uncertainty. The analysis is informed by historical investment trends during technology cycles and emphasizes the importance of a diversified investment strategy in the face of changing economic conditions.