2020 midyear update: Forecasting amid the coronavirus

24 July 2020 | Markets and economy


The COVID-19 pandemic has caused the sharpest and deepest short-term economic contraction in modern economic history. Even as some countries succeed in controlling the outbreak, the case count continues to grow globally. The twin crises of health and economics are far from over.

Our midyear update in brief:

  • The COVID-19 shock: Our baseline forecast sees a gradual return to work and no major flare-ups to warrant renewed nationwide restrictions. Risks to our forecast are skewed to the downside—a scenario of further waves of the virus and reinstated lockdowns that would be harmful to economic recovery.
  • The path to economic recovery: As virus containment measures ease, and barring outbreaks necessitating widespread renewal of restrictions, we expect economic activity to initially recover as productive potential is brought back onstream. Vanguard foresees a slow recovery thereafter, with consumers likely reluctant to resume face-to-face interactions until a vaccine is developed.
  • The financial markets: Our outlook for equity returns has improved compared with our expectations at the end of 2019 amid lower valuations and interest rates, but our outlook for fixed income returns remains muted. Elevated uncertainty persists, with further market corrections possible. We advise investors to focus on long-run expected returns, embrace global diversification, and avoid the temptation to time turbulent markets.

 Read our in-depth look at the global economic outlook, inflation, monetary policy, and the implications for investors.

 An Executive Summary is also available.

Important information:

The information contained herein does not constitute an offer or solicitation and may not be treated as an offer or solicitation in any jurisdiction where such an offer or solicitation is against the law, or to anyone to whom it is unlawful to make such an offer or solicitation, or if the person making the offer or solicitation is not qualified to do so. Broker-dealers, advisors and other intermediaries must determine whether their clients are eligible for investment in the products discussed herein.

All investing is subject to risk, including the possible loss of the money you invest. Diversification does not ensure a profit or protect against a loss. Investments in bonds are subject to interest rate, credit, and inflation risk.

Investments in stocks or bonds issued by non-U.S. companies are subject to risks including country/regional risk and currency risk.