- Vanguard and Fidelity forecast lower US stock returns
- How lower stock returns affect retirement savings
- Why Vanguard and Fidelity expect weaker stock market performance
- Vanguard expects US bond returns to approach equity returns
- What lower returns mean for retirement withdrawal strategies
- US stock market outlook for retirement investors
Fidelity Investments and Vanguard expect US stock market returns to be substantially lower over the next decade or two than the long-term historical average.
Vanguard’s latest capital market forecasts project annualized returns of 4.8-6.8% for US equities over ten years, with a midpoint of 5.8%. Fidelity’s longer-term outlook also estimates annual US equity returns of 5.8% over 20 years, equivalent to approximately 3.2% after inflation.
Both projections are significantly below the S&P 500‘s historical average annual return of approximately 10% since 1957.
Key Highlights
- Vanguard forecasts annual US stock market returns of 4.8%–6.8% over the next decade, while Fidelity projects 5.8% annually over 20 years.
- A $500,000 investment growing at 5% annually would reach approximately $814,000 after ten years, compared with $1.3 mn at the historical 10% assumption.
- Higher stock valuations and more competitive bond yields could limit future equity returns, increasing the importance of realistic retirement planning assumptions.
The US stock forecasts do not predict an imminent stock market crash. Instead, they suggest that investors and retirement savers may experience slower portfolio growth than historical performance would imply.
Vanguard and Fidelity forecast lower US stock returns
Although Vanguard and Fidelity use different forecasting methodologies and investment horizons, their central expectations for US equities are similar.
Vanguard’s forecasts, updated using market conditions as of September 30, 2026, reflect elevated stock valuations, changing bond yields and expectations for corporate earnings.
The firm raised its US equity return forecast from 4.2-6.2% to 4.8-6.8% during the third quarter. Fidelity’s 20-year assumptions point to a similar annual return of 5.8%.
US stock market return forecasts
| Investment manager | Forecast period | Expected annual return |
|---|---|---|
| Vanguard | 10 years | 4.8-6.8% |
| Vanguard midpoint | 10 years | 5.8% |
| Fidelity | 20 years | 5.8% |
| Fidelity, after inflation | 20 years | 3.2% |
| S&P 500 historical average | Since 1957 | 10% |
The forecasts are estimates rather than guaranteed outcomes. Actual returns could differ substantially depending on economic conditions, corporate profitability and market valuations.
How lower stock returns affect retirement savings
The difference between historical and projected returns becomes substantial when compounded over several years. Warren Buffett Retirement Income Strategy: Does the 90/10 Rule Still Work?
An investor starting with $500,000 and earning 10% annually would accumulate approximately $1.3 mn after ten years. At a 5% annual return, the same investment would grow to approximately $814,000.
That represents a difference of nearly $483,000 without changing the initial investment or time horizon.
Retirement portfolio growth under different return scenarios
| Annual return | Starting investment | Value after 10 years |
|---|---|---|
| 3% | $500,000 | $672,000 |
| 5% | $500,000 | $814,000 |
| 5.8% | $500,000 | $878,000 |
| 6.8% | $500,000 | $965,000 |
| 10% | $500,000 | $1.3 mn |
These differences are particularly relevant for individuals approaching retirement (see about IRS 2027 Federal Tax Brackets).
Workers with 10-15 years remaining may have time to adjust contributions, retirement dates or spending expectations. Those nearing retirement have less time to compensate for prolonged periods of lower returns.
Why Vanguard and Fidelity expect weaker stock market performance
Elevated US equity valuations are an important factor behind the forecasts. When investors pay higher prices relative to corporate earnings, future returns can become more dependent on sustained profit growth.
The US stock market has also benefited from a prolonged period of favorable financial conditions, including low interest rates, expanding corporate margins and substantial share repurchases.
Those conditions may be harder to replicate over the coming decade.
Higher interest rates have also made bonds more competitive with equities. For much of the previous decade, low bond yields encouraged investors to allocate more capital to stocks.
The current environment offers higher expected fixed-income returns, potentially reducing the additional compensation investors receive for taking equity risk.
Vanguard expects US bond returns to approach equity returns
Vanguard’s September 2026 forecasts indicate that several fixed-income asset classes could generate returns close to those expected from US equities.
Vanguard 10-year investment return forecasts
| Asset class | Expected annual return |
|---|---|
| US equities | 4.8-6.8% |
| Developed market equities excluding US | 5.3-7.3% |
| Emerging market equities | 3.7-5.7% |
| US aggregate bonds | 5.1-6.1% |
| US high-yield corporate bonds | 5.4-6.4% |
The midpoint of Vanguard’s US aggregate bond forecast is 5.6%, compared with 5.8% for domestic equities. This leaves a projected difference of just 0.2 percentage points between the two asset classes.
However, similar expected returns do not imply equivalent investment risks. Stocks and bonds respond differently to economic conditions, inflation and changes in interest rates.
What lower returns mean for retirement withdrawal strategies
Lower expected investment returns also affect retirement income planning. A retirement strategy based on strong historical equity performance may produce different outcomes if annual returns average closer to 5%–6%.
Morningstar’s retirement income research estimates a 3.9% starting withdrawal rate for retirees seeking inflation-adjusted annual spending over a 30-year retirement period, assuming a 90% probability of funds lasting throughout that period.
The estimate depends on portfolio composition, market assumptions and the length of retirement. It is not a guarantee that a particular withdrawal rate will be sustainable.
Retirement outcomes are also affected by the sequence of investment returns.
Large market declines early in retirement can have a disproportionate effect because withdrawals reduce the capital available to participate in subsequent recoveries.
For this reason, retirement income planning increasingly considers flexible withdrawals, cash reserves and alternative income sources alongside expected portfolio returns.
US stock market outlook for retirement investors
The projections from Vanguard and Fidelity indicate that investors may need to distinguish historical performance from future return expectations.
Both firms continue to anticipate positive long-term US equity returns, but their estimates suggest a more moderate growth environment than the historical S&P 500 average.
Higher bond yields could also change the balance between equity and fixed-income returns.
For retirement savers, the main implication is that projected account balances are sensitive to the assumed rate of investment growth.
A financial plan calculated using 10% annual returns can produce a substantially different result from one based on 5-6%.
Neither forecast establishes that US stocks will underperform over the next decade. Economic growth, productivity improvements, corporate earnings and changing valuations could lead to stronger or weaker results.
Nevertheless, the similarity between Fidelity’s and Vanguard’s expectations highlights the potential consequences of relying exclusively on historical stock market averages when estimating future retirement savings.
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AUTHOR: Tetiana Mykhailova – Senior Investment Analyst & CFO of Beinsure, Commercial Director of Finance Media
