Adoption is accelerating, and while today’s leaders dominate headlines, tomorrow’s winners may look very different. The 2026 Vanguard economic and market outlook (VEMO) delves into potential implications.

 

Despite strong near-term earnings expectations for hyperscalers—the firms behind massive AI investments—we believe the best investment opportunities will emerge outside this sector. Our capital markets projections show that the strongest risk-return profiles across public investments over the coming five to 10 years are, in order: high-quality U.S. fixed income, U.S. value-oriented equities, and non-U.S. developed markets equities.

 

We expect returns for U.S. stocks—particularly growth stocks—to be muted over the next five to 10 years. In contrast, bonds remain attractive, underpinning our VEMO portfolio allocation of 40% stocks and 60% bonds. The leading investment opportunities are both offensive and defensive, making sense whether AI changes how we live or falls short and government deficits dominate the investing landscape.