LIVE MARKETS-Vanguard loves outlook for bonds more than some US stocks

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VANGUARD LOVES OUTLOOK FOR BONDS MORE THAN SOME US STOCKS

Vanguard is bullish on the outlook for high quality U.S. fixed income over the next five to 10-years, seeing the sector as likely to offer some of the strongest risk-return profiles among public investments.

The asset manager expects taxable and non-taxable bonds to offer “compelling real returns” due to higher neutral rates, which it sees at around 4% for the next decade.

That means that “returns on high-quality U.S. bonds should average near current portfolio income levels—providing a comfortable margin over the rate of expected future inflation. That’s the primary reason why bonds are back, no matter what central banks do in 2026."

Vanguard stresses that it is referring to quality credits. Supply and demand mismatches may keep spreads tight and the likelihood of further tightening is low, leaving a one-sided risk profile.

The asset manager adds that high quality U.S. fixed income will offer diversification given the “material downside risk” that is sees for stocks in 2026 and beyond if a productivity boost from artificial intelligence is not realized.

(Karen Brettell)

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