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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 report on the outlook for 2026, with a warning: prepare for AI-driven economic upsides and a potential stock market downturn (2).
This could sound the alarm for many investors, especially those leveraged in U.S. markets. After all, conventional investing wisdom suggests a 60/40 investment split between stocks and bonds. If you’ve been following this guideline and are approaching retirement age, you might want to re-examine your portfolio mix.
Here’s a closer look at what the report says older Americans can expect in 2026.
According to Vanguard, the U.S. stock market is expected to deliver an annualized return of between 4% and 5% over the next five to 10 years.
That’s uncomfortably close to the 4% withdrawal rate many retirees depend on to meet living expenses. Like the 60/40 portfolio, advisors often suggest taking 4% out of your retirement account every year post-retirement, with adjustments for inflation, as a rule of thumb.
Vanguard’s estimate is also considerably lower than S&P 500’s performance over the preceding 10 years. Between 2016 and the start of 2026, the S&P delivered an annualized return of about 13.8% (3).
One potential reason is fear that the U.S. tech stocks leading the charge may be headed for a slowdown. Vanguard’s report cautions those banking on large-cap tech’s explosive growth, stating, “let us be clear: risks are growing amid this exuberance.” This risk-assessment of large-cap tech companies is the primary factor for the lower U.S. stock market annualized returns projection.
In other words, Vanguard’s analysts believe that past performance may not be indicative of future returns — and possibly not nearly as impressive as investors have experienced in recent years.
Another consideration is the “Buffett Indicator,” which tracks the ratio of market capitalization to GDP. Essentially, investing 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 stock valuation is speculative, not actual. Currently, the indicator sits at about 224%, meaning the market could be significantly over-valued (4).
If you’re retired or approaching retirement with a portfolio committed to U.S. stocks, these forecasts could be cause for some concern. However, the report also highlights other asset classes that could still perform, or at least retain more of their value during a decline, in the years ahead.
Not all asset classes are facing a bleak decade. In fact, some might outperform. Vanguard’s forecast suggests that non-U.S. equities could deliver annualized returns ranging from 4.9% to 6.9% over the next 10 years. That’s a better range than what they’ve estimated for U.S. equities over that same period.
There are already signs of this trend playing out. Canada’s benchmark stock index, the S&P/TSX Composite, has delivered a 30.3% return in the past year (4). So, although the Canadian market has underperformed the American market for the past decade, Canada’s index has outperformed the S&P 500 over the past 12 months.
Then there’s Europe. UBS Group expects €1.2 trillion ($1.4 trillion) of capital to rotate from U.S. to European equities in 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 for generating above-average returns. While it can require more work and dedication than simply investing in a broad-based index, there are plenty of high-grade tools out there to help you pick the right stocks and bonds for your financial objectives.
For instance, platforms like Moby can help make that process simpler and smoother. Moby offers you investment insights broken down into simple, easy-to-understand language — no jargon here.
Each week, Moby delivers one to three curated stock picks straight to you. Reports are written by a team of former hedge fund analysts and financial experts who spend hundreds of hours per week sifting through the latest financial news and data.
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 if U.S. stocks will overshoot or undershoot Vanguard’s forecast.
If you want to bet on America, there’s room for further growth in U.S. equities, especially if you want to diversify out of the public market.
After all, public markets show just one side of how wealth is created. Many of the biggest and most successful tech companies remain privately held for years, growing behind the scenes and building incredible value long before the IPO bell is rung. While they are inherently higher risk investments, which might not be your best decision for retirement funds, they can offer diversification away from the tech titans, which have been dominating the S&P 500.
Venture capital is where the early bets on future giants are placed. But, for decades, venture capital has been one of the few remaining tables in finance where retail investors can’t get a seat.
Fundrise finally disrupted that dynamic a few years ago by launching a venture capital product with two goals: first, to build a portfolio of the most valuable private tech companies in the world. Second, to make it available to as many people as possible with investments starting at just $10.
Today, Fundrise manages billions of dollars in private market assets and their venture capital product is designed specifically for investors like you who want to get in early on transformative technologies like AI.
And even if you believe in the American market’s future, diversifying your portfolio to be less reliant on domestic stocks isn’t a bad idea. According to Alliance Bernstein’s analysis of Morningstar (7), U.S. investors hold just 15% of their portfolios in international stocks, which puts them at risk of “home bias.”
This over-exposure to American stocks can also mean you are over-invested in just a few dominant firms, according to J.P. Morgan (8). The firm notes, “Adding global holdings can help smooth performance across different economic conditions.” Keep in mind that the key to Vanguard’s warning about lower market returns was a risk assessment of high-cap tech companies.
And given that most retirees are seeking 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 objectives and investment strategies are personal — and it can 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 suits your specific needs and financial goals is simple with Vanguard.
With a minimum portfolio size of $50,000, this service is best for clients who already have a nest egg built and would like to try to grow their wealth with a variety of different investments. All you have to do is set up a consultation with a Vanguard advisor, and they will help you set a tailored plan and stick to it.
If you’re already retired and worried about the stock market, you might want to consider adding alternative assets such as gold to your portfolio.
Gold is a known hedge against stock market volatility, and can be a solid way to help protect your retirement funds from eroding in a recession. The precious yellow metal has also been on a historic bull run, and struck over $5,000 per ounce in late January (9).
One way to invest in gold that can provide 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 within 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 potentially hedge their retirement funds against economic uncertainty or market dips.
It can also pay to make sure your hard-earned savings are being put to work in the background. Unlike investments, savings can carry a much lower risk of losing their 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 instance, a high-yield account such as 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 your cash when you need it.
High-yield accounts like this can also be a great way to build an emergency fund in the event that something happens during your retirement. Having between three to six months of monthly expenses in your account could be the difference between tapping into your retirement savings early and weathering an unexpected health event, or market dip.
Even better, a Wealthfront Cash Account provides a base variable APY of 3.25%, but new clients can get a 0.65% boost over their first three months for a total APY of 3.90% provided by program banks on your uninvested cash. That’s 10 times the national deposit savings rate, according to the FDIC’s January report.
