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A midyear update on our economic and market outlook

By: ETFdb
The outlook for the global economy continues to hinge on health outcomes. In our annual economic and market outlook published at the end of 2020, Vanguard economists expected that the path to recovery would be uneven and varied across industries and countries, even once effective vaccines for COVID-19 became available. Fast forward half a year. The pandemic is still far from over as new virus variants surface where vaccination rates lag and as the human toll continues to mount, especially in less developed economies. Yet macroeconomic indicators signal that the global economy is rebounding faster than many had expected from its sharpest contraction in modern history. That rebound is reflected in our current full-year GDP growth forecasts, which remain roughly in line with our optimistic projections at the start of 2021. In some places, we’ve upgraded our forecasts; in others, we’ve downgraded them. Countries that have contained the virus more successfully, whether through vaccinations, lockdowns, or both, have tended to see their economies hold up better, said Andrew Patterson, senior international economist in Vanguard’s Investment Strategy Group. As economies open up, demand—supported in many countries by government spending—will promote growth and, by extension, underlie our outlooks for inflation and monetary policy. Given Vanguard’s focus on return expectations over the long term, revisions to our investment return outlooks remain a function of valuations and risks informed by current and expected future macroeconomic conditions and policy.
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