Vanguard, the index fund pioneer with a staggering $11 trillion in assets under management, stands as a colossal force in American capital markets. Therefore, its release of a stock market outlook report deserves serious attention from investors. In July, Vanguard published a ten-year forecast spanning multiple asset classes, including municipal bonds and mortgage-backed securities.
A key driver of the market's past performance, tax cuts from the "Trump Tax Cuts and Jobs Act," are set to expire after 2028. Experts believe many investors will miss the window to adjust their strategies. The question is: how should one plan before this window closes? However, the report's projections for the stock market have raised significant alarm among many American retirees. Below is a breakdown of the report's assessment of the investment environment for older investors in the coming years.
US Stock Market Returns Are Expected to Weaken Significantly
Vanguard forecasts that the annualized return for US stocks over the next decade will be in a range of just 3.3% to 5.3%, a sharp decline from the performance of the past ten years. From 2015 to the present, the S&P 500 index has posted an annualized return of 15.26%. In other words, Vanguard analysts believe that, barring a deep crash like the one during the COVID-19 pandemic, it will be difficult for US stocks to replicate the stellar gains of recent years. The outlook for growth stocks is even more pessimistic, with expected annualized returns of only 1.9% to 3.9%. This figure is perilously close to the 4% withdrawal rule that many retirees rely on for their daily expenses. If you are already retired or nearing retirement, and your portfolio is heavily weighted in US stocks, this forecast demands your attention. The good news is that the report also indicates that some other asset classes are expected to generate better returns.
More Promising Alternative Assets
Not all asset classes face a bleak decade ahead. Some categories are expected to deliver superior returns. Vanguard predicts that US Treasury bonds will offer an annualized return of 3.8% to 4.8% over the next decade, outperforming growth stocks while carrying lower volatility and risk. The firm is also optimistic about developed market stocks outside the United States. It projects that, through 2035, developed market stocks (excluding the US) will deliver annualized returns in the range of 5.7% to 7.7%. There are already signs supporting this trend. The S&P/TSX Composite Index in Canada has risen 23.9% so far this year through mid-October, outperforming the S&P 500's 13.8% return over the same period. Similarly, UBS predicts that $1.4 trillion in capital will flow from US stocks to European stock markets over the next five years. In this environment, a stock-picking strategy could potentially yield returns above the market average. While it requires more effort than investing in a broad-based index, there are now excellent tools to assist investors. Platforms like Moby, for example, can simplify the stock selection process by presenting investment ideas in plain language, avoiding complex jargon. The platform sends users 1 to 3 stock picks each week, with research reports written by a team of former hedge fund analysts and financial experts who spend hundreds of hours each week reviewing the latest financial news and data. Notably, the average return of Moby's recommended stocks has outperformed the S&P 500 by nearly 12%.
How Should Investors Respond?
Any stock market forecast, even from a trillion-dollar asset manager, should be viewed with a rational perspective. No one can be certain whether US stocks will ultimately land above or below Vanguard's predicted range. Nevertheless, it is a wise move to optimize your portfolio and reduce your reliance on domestic stocks. An analysis by AllianceBernstein, citing Morningstar data, shows that US investors have only 15% of their portfolios in international stocks, indicating a widespread home bias. If your holdings are overly concentrated in US stocks, consider increasing your allocation to foreign stocks and bonds. Additionally, diversifying into alternative assets, such as gold, can be beneficial. Gold has historically served as a hedge against stock market volatility and can help prevent your retirement savings from shrinking during an economic downturn. Gold has entered a historic bull market in 2025, with prices currently holding above $4,000 per ounce. A tax-advantaged way to invest in gold is through a Gold IRA with Priority Gold. A Gold IRA allows you to hold physical gold or gold-related assets within a retirement account, combining the tax benefits of an IRA with gold's safe-haven value. It is suitable for those looking to hedge against economic uncertainty and protect their retirement funds. You can get a free guide to learn about the offer, with eligible orders receiving up to $10,000 in free silver. At the same time, it is also important to put idle savings to work. Compared to investment products, the risk of principal loss for savings is extremely low. Earning a stable return on your savings is a lower-risk, more certain way to grow your wealth. SoFi Bank offers a fee-free checking account with no monthly management fees and no minimum balance requirements. After setting up direct deposit or meeting qualifying deposit conditions, your savings account can earn an annual percentage yield (APY) of 4.00%, while your checking account earns 0.50% APY. New users who set up automatic transfers can earn up to a $300 cash bonus. Account deposits are FDIC-insured up to $250,000, with an additional potential coverage of up to $2 million through the SoFi Deposit Insurance Program. Financial advisors generally recommend that as you age and approach retirement, your investment style should become more conservative. If you are already retired and concerned about stock market risk, you can increase your portfolio's allocation to stable fixed-income assets like US Treasury bonds. It is also advisable to consult with a professional financial advisor, considering your retirement goals and financial situation. Vanguard is not only a top-tier global asset manager but also offers a wide range of financial services. You can schedule an appointment with a dedicated advisor to assess your current financial health and build an investment portfolio that aligns with your goals. Vanguard's hybrid advisory model combines personalized professional advice with automated portfolio management to ensure your investments stay on track with your financial objectives.
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