2020 midyear update: Forecasting amid the coronavirus

July 22, 2020

A/AText size:AAA

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 Vanguard Economic and Market Outlook: Forecasting in the Time of Coronavirus to learn more about our global economic outlook, inflation, monetary policy, and the implications for investors.

Read PDF  


  • 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.