What does Vanguard see for 2020? Here are a few highlights:
Global growth slows in 2020 and sets the stage for a potential shallow recession in the US with growth around 1%;
With a shallow recession possible, the Federal Reserve will need to cut interest rates once or twice in 2020;
US-China trade tensions will continue as some larger scale structural trade issues still remain unresolved;
Global and US inflation will remain muted due to slowing economic and wage growth; and
US unemployment rates should remain stable or rise slightly due to a slowing labor market and muted wage pressures.
What do the above macro-economic perspectives mean for your portfolio going forward? Vanguard provides the following 10-year annualized nominal return projection estimates as a gauge:
Equities
Global equities ex-U.S. (unhedged) 6.5%–8.5%
U.S. equities 3.5%–5.5%
U.S. real estate investment trusts 2.5%–4.5%
Fixed income
U.S. bonds 1.5%–3.5%
U.S. Treasury bonds 1.0%–3.0%
Global bonds ex-U.S. (hedged) 1.0%–3.0%
U.S. credit bonds 2.0%–4.0%
U.S. high-yield corporate bonds 3.0%–5.0%
U.S. Treasury inflation-protected securities 1.0%–3.0%
U.S. cash 1.0%–3.0%
With US equities potentially returning between 3.5% and 5.5% and US bonds forecasted to return between 1.5-3.5%, it is a good time to make sure you have sufficient international exposure in your portfolio.
To see a mid-year 2020 Vanguard Economic Outlook update, click here.
If you have questions about your investment portfolio, please feel free to contact Intelligent Investing at www.mynmfp.com/new-clients for a no-obligation consultation.
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David L. Hogans, Esq. is an author and the founder of Intelligent Investing, Inc., a registered investment advisor firm located in Albuquerque, NM. He earned his Bachelor of Science in Chemical Engineering (ChE) from Virginia Tech and his Juris Doctorate (JD) from the University of Dayton. Mr. Hogans is licensed to practice law in the states of Virginia and New Mexico, as well as, before the Federal Patent Bar. For more information about Mr. Hogans and his firm please see his filing with the Securities and Exchange Commission (SEC) (https://files.adviserinfo.sec.gov/IAPD/Content/Common/crd_iapd_Brochure.aspx?BRCHR_VRSN_ID=602988).