2020 midyear update: Forecasting amid the coronavirus

23 July 2020 | Markets and Economy


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 mid-year 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 an initial recovery of economic activity as productive potential is brought back on stream. 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-term expected returns, embrace global diversification, and avoid the temptation to time turbulent markets.

Read more about our global economic outlook, inflation, monetary policy and the implications for investors:

Executive summary

Q&A with Vanguard's global economics team

Full report




Important risk information:

The value of investments, and the income from them, may fall or rise and investors may get back less than they invested.

Other important information:

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Issued by Vanguard Asset Management, Ltd, which is authorised and regulated in the UK by the Financial Conduct Authority. In Switzerland, issued by Vanguard Investments Switzerland GmbH.