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With $12 trillion in assets under management, Vanguard is one of America’s most notable investment firms (1).
In December, Vanguard released its annual Outlook to 2026 report with a warning: brace yourself for AI-driven economic booms and a potential stock market crash (2).
This could raise alarm bells for many investors, especially those with leverage in US markets. After all, conventional investment wisdom suggests a 60/40 investment split between stocks and bonds. If you’ve followed this guide and are nearing retirement age, you may want to reexamine your portfolio mix.
Here’s a closer look at what the report says older Americans can expect in 2026.
According to Vanguard, the US stock market is expected to provide an annual return of between 4% and 5% over the next five to 10 years.
That’s uncomfortably close to the 4% withdrawal rate that many retirees depend on to cover their living expenses. Like the 60/40 portfolio, advisors often suggest taking 4% out of your retirement account each year after retirement, adjusted for inflation, as a rule of thumb.
Vanguard’s estimate is also considerably lower than the S&P 500’s performance over the past 10 years. Between 2016 and early 2026, the S&P delivered an annualized return of around 13.8% (3).
One potential reason is the fear that US tech stocks, which lead the charge, could be headed for a slowdown. The Vanguard report cautions those banking on the explosive growth of large-cap tech, saying, “let’s be clear: the risks are rising amid this exuberance.” This risk assessment for large-cap technology companies is the main driver for the lower projection of annualized US stock market returns.
In other words, Vanguard analysts believe that past performance may not be indicative of future returns — and may not be as impressive as investors have experienced in recent years.
Another consideration is the “Buffett indicator,” which tracks the ratio of market capitalization to GDP. In essence, investment legend Warren Buffett notes that if the stock market is valued at a significantly higher rate than a country’s GDP, it could indicate that the stock’s valuation is speculative, not real. Currently, the indicator is at around 224%, which means that the market could be significantly overvalued (4).
If you are in or nearing retirement with a portfolio dedicated to US stocks, these forecasts may be a cause for concern. However, the report highlights other asset classes that could still perform, or at least retain more of their value during a downturn, in the years ahead.
Read more: Approaching retirement with no savings? Don’t panic, you are not alone. Here are 6 easy ways to catch up (and fast)
Not all asset classes are facing a bleak decade. In fact, some may exceed. Vanguard’s forecast suggests that non-US stocks could deliver annualized returns of between 4.9% and 6.9% over the next 10 years. That’s a better range than what they estimated for U.S. stocks over the same period.
There are already signs of this trend. Canada’s benchmark stock index, the S&P/TSX Composite, has returned 30.3% over the past year (4). So while the Canadian market has underperformed the US market over the past decade, Canada’s index has outperformed the S&P 500 over the past 12 months.
Then there is Europe. UBS Group expects €1.2 trillion ($1.4 trillion) of capital to shift from US to European equities over the next four years (5). According to Fidelity, Europe’s boom will be driven by renewed infrastructure and defense spending (6).
This is where being selective about your investments can become an attractive strategy to generate above-average returns. While it may require more work and dedication than simply investing in a broad-based index, there are plenty of high-quality tools to help you choose the right stocks and bonds for your financial goals.
For example, platforms like Moby can make this process simpler and easier. Moby gives you investment information broken down in simple, easy-to-understand language – no jargon here.
Each week, Moby brings one to three stock selections straight to you. The reports are written by a team of former hedge fund analysts and financial experts who spend hundreds of hours a week researching the latest financial news and data.
The best part? Moby’s picks outperformed S&P 500 returns by nearly 12%, on average.
It’s also worth remembering that stock market predictions, even those from a trillion-dollar investment firm, are just that: predictions. It’s impossible to say whether U.S. stocks will beat or beat Vanguard’s forecast.
If you want to bet on America, there is room for further growth in US stocks, especially if you want to diversify outside of the public market.
After all, public markets only show one side of how wealth is created. Many of the largest and most successful tech companies remain privately held for years, growing behind the scenes and building incredible value long before the IPO bell rings. While they are inherently riskier investments that may not be the best decision for pension funds, they can provide diversification away from the tech titans that have dominated the S&P 500.
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And even if you believe in the future of the US market, diversifying your portfolio to be less dependent on domestic stocks is not a bad idea. According to Morningstar analysis (7) by Alliance Bernstein, US investors hold only 15% of their portfolios in international stocks, exposing them to the risk of “origin bias”.
This overexposure to US stocks can also mean you are overinvested in just a few dominant firms, according to JP Morgan (8). The firm notes, “Adding global holdings can help deliver consistent performance across different economic conditions.” Note that the key to Vanguard’s warning about lower market returns was an assessment of the risks of large-cap companies.
And with most retirees looking for stability in their investments, this could be an ideal risk mitigation move.
Similarly, financial advisors often recommend being more conservative as you get older and closer to retirement. But your investment goals and strategies are personal — and it may be worth working with a professional advisor to make sure you’re following the best plan for your dream retirement.
Finding a financial advisor that fits your specific needs and financial goals is simple with Vanguard.
Vanguard’s hybrid advisory system combines advice from professional advisors and automated portfolio management to ensure your investments are working to achieve your financial goals.
With a minimum portfolio size of $50,000, this service is best for clients who have already built a nest egg and would like to try to grow their wealth with a variety of different investments. All you have to do is schedule a consultation with a Vanguard advisor, and they’ll help you set up a personalized plan and stick to it.
If you’re already retired and worried about the stock market, you may want to consider adding alternative assets like gold to your portfolio.
Gold is a known hedge against stock market volatility and can be a solid way to protect your retirement funds from erosion during recessions. The yellow precious metal has also been on a historic bull run and hit over $5,000 an ounce in late January (9).
One way to invest in gold that can offer significant tax advantages is to open a gold IRA with the help of Thor Metals.
Gold IRAs allow investors to hold physical gold or gold-related assets in a retirement account, which can combine the tax advantages of an IRA with the protective benefits of investing in gold. This could make them an attractive option for those looking to protect their pension funds against economic uncertainty or market downturns.
To learn more, you can get a free informative guide that includes details on how to get up to $20,000 in free metals on qualifying purchases.
It can also pay to make sure your hard-earned savings are put to work in the background. Unlike investments, savings can have a much lower risk of losing value.
So getting a solid rate of return on your savings account is a less risky way to grow your wealth with greater reliability and stability.
For example, a high-yield account like the Wealthfront Cash Account can be a great place to grow your savings and emergency funds, offering both competitive interest rates and easy access to cash when you need it.
High-yield accounts like this can also be a great way to build an emergency fund in case something happens during retirement. Having three to six months of monthly expenses in your account could be the difference between accessing your retirement savings early and weathering an unexpected health event or market downturn.
Even better, a Wealthfront cash account offers a base variable APY of 3.25%, but new customers can get a 0.65% bump in the first three months for a total APY of 3.90% offered by program banks on your uninvested cash. That’s 10 times the national deposit savings rate, according to the FDIC’s January report.
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Vanguard (1), (2); S&P Global (3), (5); BuffettIndicator.net (4) Yahoo! Finance (5); Fidelity (6) Bernstein Alliance (7); JP Morgan (8); The price of gold (9)
This article provides information only and should not be construed as advice. Offered without warranty of any kind.
