Economic recoveries from the COVID-19 pandemic have been rapid and impressive. This video highlights our views on global economies and how they’ve changed since the start of 2021.

Learn more about our economic and market views at midyear.


In our 2021 economic and market outlook, Vanguard discussed the critical nature of COVID-19 health outcomes. We assumed that an effective vaccine would emerge, but we emphasized that recovery would vary across industries and regions.

Economic recoveries have been rapid and impressive, as we foreshadowed, especially where vaccinations have reached the most people.

Our revised full-year GDP growth forecasts reflect how far we’ve climbed back from pandemic depths. Several are upgrades from the start of 2021, and a few are downgrades, reflecting the challenges ahead and a wide range of potential outcomes.

Demand for goods and services is rising as economies reopen, especially in the United States. Supply shortages have helped push up prices.

We foresee core inflation persisting above the Federal Reserve’s target this year in the United States, and moving toward targets in other developed markets. Inflation will remain an important theme into 2022.

Though central banks may slow their pace of asset purchases sooner than originally expected—beginning a gradual move away from accommodative monetary policy—we believe it will largely be 2023 before labor market and inflation dynamics lead them to raise policy interest rates.

Low rates helped sustain economies at the start of the pandemic. Now they support robust recoveries.
And what about our market outlook? Our 10-year annualized equity return projections are lower than at the start of the year after recent strong market gains. Today’s higher valuations make further gains harder to come by.

The news is better for fixed income investors, with higher market interest rates broadly pushing up our expectations for 10-year returns.

Look to Vanguard for insights that put long-term market and economic trends in perspective.

Important information:

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss in a declining market. 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.

International investing is subject to additional risks, including the possibility that returns will be hurt by a decline in the value of foreign currencies or by unfavorable developments in a particular country or region.

Bond funds are subject to the risk that an issuer will fail to make payments on time, and that bond prices will decline because of rising interest rates or negative perceptions of an issuer’s ability to make payments.

About the Vanguard Capital Markets Model:

IMPORTANT: The projections and other information generated by the Vanguard Capital Markets Model regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. VCMM results will vary with each use and over time.

The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More important, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based.

The Vanguard Capital Markets Model® is a proprietary financial simulation tool developed and maintained by Vanguard’s Investment Strategy Group. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include U.S. and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data. Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over several time horizons. Forecasts are obtained by computing measures of central tendency in these simulations. Results produced by the tool will vary with each use and over time.

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