Vanguard – Economic and Market Outlook for 2026

This report provides an economic and market outlook for 2026 with a focus on the impact of artificial intelligence (AI).

AI is considered a transformative economic force that could boost productivity across industries, potentially driving U.S. economic growth by about 3%. Inflation is expected to remain sticky, limiting the Federal Reserve's ability to cut interest rates below an estimated neutral rate of 3.5%. Equity markets, especially growth- and tech-heavy U.S. equities, may remain exuberant but face rising risks as AI investment increases. The report favors high-quality bonds and value stocks for better risk-return prospects. Regional forecasts include growth and inflation estimates for the U.S., Euro area, and China, with key risks identified such as AI optimism collapse and inflation undershooting.