![\"\"](\"https:\/\/acctweb.com.au\/images\/globe-11.jpg\")
<\/p>\nTariff reprieves, trade deals brighten the economic horizon<\/p>\n
<\/p>\n
.<\/p>\n
Amid weaker global growth, expect a dovish central bank.<\/p>\n
\u201cGiven the combination of weaker global growth and heightened uncertainty, we expect the Reserve Bank of Australia to adopt a dovish stance.\u201d Grant Feng, Vanguard Senior Economist.<\/p>\n
For Australia, the direct impact of U.S. tariffs should be limited. The country exports a relatively small volume of goods to the U.S., and the reciprocal U.S. tariff rate on Australian goods was set at 10%, the lowest among affected countries, in early April. However, the indirect effects are likely to be more significant, including slower economic growth in China and a negative impact on domestic consumption and business investment confidence. Overall, we expect the Australian economy to grow around 2% over 2025, with policy easing partly offsetting the impact of uncertainty.<\/p>\n
We anticipate that inflation will stay within the 2%\u20133% band targeted by the Reserve Bank of Australia (RBA), though it is likely to be toward the upper half of that range. A tight labour market will continue to exert upward pressure on unit labour costs, prolonging the disinflation process. Additionally, supply-side weakness, stemming from lacklustre productivity growth, will remain a hindrance to faster disinflation in 2025.<\/p>\n
Given the combination of weaker global growth and heightened uncertainty, we expect the RBA to adopt a dovish stance. The RBA cut its policy rate by 0.25 percentage points to 3.85% on May 20. We foresee two further quarter-point cuts this year.<\/p>\n
\u00a0<\/p>\n
| \n Asset class<\/strong><\/p>\n<\/th>\n Return range<\/strong><\/p>\n<\/th>\n Median volatility<\/strong><\/p>\n<\/th>\n<\/tr>\n Australian equities<\/p>\n<\/td>\n 5.6% – 7.6%<\/p>\n<\/td>\n 20.1%<\/p>\n<\/td>\n<\/tr>\n Global ex-Australia equities (unhedged)<\/p>\n<\/td>\n 5.3% – 7.3%<\/p>\n<\/td>\n 16.4%<\/p>\n<\/td>\n<\/tr>\n US equities (unhedged)<\/p>\n<\/td>\n 4.6% – 6.6%<\/p>\n<\/td>\n 17.4%<\/p>\n<\/td>\n<\/tr>\n Australian aggregate bonds<\/p>\n<\/td>\n 3.5% – 4.5%<\/p>\n<\/td>\n 6.3%<\/p>\n<\/td>\n<\/tr>\n Global ex-Australia aggregate bonds (hedged)<\/p>\n<\/td>\n 3.9% – 4.9%<\/p>\n<\/td>\n 5.3%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:<\/strong>\u00a0Values are approximate. GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Trimmed mean inflation is the year-over-year change in the Consumer Price Index, excluding items at the extremes, as of the fourth-quarter 2025 reading. Monetary policy is the RBA\u2019s year-end cash rate target.\u00a0<\/sup><\/p>\n Source:\u00a0<\/strong>Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Trimmed mean inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n 2%<\/p>\n<\/td>\n 4.2%<\/p>\n<\/td>\n 2.5%<\/p>\n<\/td>\n 3.35%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Source:\u00a0<\/strong>Vanguard\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Tariff reprieve strengthens our 2025 outlook.\u00a0<\/p>\n \u201cThe recent tariff developments, if sustained, would mitigate the challenges to the Federal Reserve\u2019s dual mandate of ensuring price stability and supporting maximum sustainable employment.\u201d Josh Hirt, Vanguard Senior Economist.\u00a0<\/p>\n Positive trade developments with China have lowered our assessment of where the United States\u2019 effective tariff rate on its trading partners will stand at year-end, to a range just above 10%. Although elevated compared with last year, it is significantly lower than our assessment of around 20% immediately after the broad U.S. tariff announcement on April 2.<\/p>\n A trade truce on May 12 with China specifically, which included the lowering of U.S. tariffs on Chinese goods to 30% for 90 days, informs our revised outlooks for the U.S. economy. We now expect GDP growth of around 1.5% this year, or double our previous estimate. Although we anticipate the unemployment rate increasing from current levels, we no longer see it rising as high as 5%.<\/p>\n We expect the pace of inflation to increase too, though not to the levels we had envisioned pre-truce. We anticipate that goods prices will spike into the U.S. summer as tariff-induced price increases take effect. Leading indicators suggest some modest relief for shelter inflation later in the year, though potential developments with lumber tariffs present an upside risk.<\/p>\n The recent tariff developments should mitigate the severity of the challenges to the Federal Reserve\u2019s dual mandate of ensuring price stability and supporting maximum sustainable employment. We continue to expect two quarter-point Fed rate cuts in the second half of the year. The Fed will have room to be patient with rate cuts if the labour market remains resilient.\u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Core inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n 1.5%<\/p>\n<\/td>\n 4.7%<\/p>\n<\/td>\n 3%<\/p>\n<\/td>\n 4%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:<\/strong>\u00a0Values are approximate. GDP growth is defined as the fourth-quarter-over-fourth-quarter change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year percentage change in the Personal Consumption Expenditures price index, excluding volatile food and energy prices, as of December 2025. Monetary policy is the upper end of the Federal Reserve\u2019s target range for the federal funds rate at year-end.<\/sup><\/p>\n Source:<\/strong>\u00a0Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Trade uncertainty likely to weigh on investment.<\/p>\n \u201cSignificant U.S. tariffs are likely to weigh on Canadian business investment, consumer spending, and the labour market.\u201d Adam Schickling, Vanguard Senior Economist.<\/p>\n The Canadian economy has been challenged by trade-related uncertainties and softening demand for services. Despite recent interest rate cuts, significant tariffs on Canada\u2019s automobile sector and broader tariff measures from the U.S. are likely to weigh on Canadian business investment, consumer spending, and the labour market. We expect the Canadian economy to grow around 1.25% in 2025 and the unemployment rate to rise to about 7% by year-end, but both forecasts are sensitive to U.S.-Canada trade developments.<\/p>\n The Bank of Canada (BoC) opted to hold its policy overnight rate at 2.75% at its April 16 meeting, a pause in what had been seven consecutive rate cuts. Policymakers emphasised the need for caution amid substantial U.S.-Canada trade uncertainty and concerns about the inflationary implications of retaliatory tariffs on U.S. imports. Ultimately, we expect the economic impacts from tariffs and trade uncertainty to outweigh any inflationary risks, prompting the BoC to cut the overnight rate by half a percentage point by year-end, to 2.25%.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Core inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n 1.25%<\/p>\n<\/td>\n 7%<\/p>\n<\/td>\n 2.5%<\/p>\n<\/td>\n 2.25%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:<\/strong>\u00a0Values are approximate. GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year change in the Consumer Price Index, excluding volatile food and energy prices, as of December 2025. Monetary policy is the BoC\u2019s year-end target for the overnight rate.\u00a0<\/sup><\/p>\n Source:<\/strong>\u00a0Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Challenges, opportunities for Mexico amid tariffs.<\/p>\n \u201cThe potential for U.S.-Mexico trade negotiations to occur relatively soon could mitigate some possible negative tariff impacts.\u201d Adam Schickling, Vanguard Senior Economist.\u00a0\u00a0<\/p>\n We recently revised our 2025 GDP growth forecast for Mexico to below 1% due to headwinds from trade developments and the uncertainty surrounding trade policy, which are affecting business investment and manufacturing employment. The Bank of Mexico (Banxico) cut the overnight interbank rate by 50 basis points to 8.5% on May 15, citing increased global risks amid escalating trade tensions and stable inflation. We expect the rate to end 2025 from 8% to 8.25%.\u00a0<\/p>\n The recent announcement of U.S. tariffs on the Mexican automobile sector is particularly significant, given that sector\u2019s importance to the Mexican economy. The automotive industry accounts for about 4% of Mexico\u2019s GDP and employs approximately 1 million workers. Despite these challenges, the potential for U.S.-Mexico trade negotiations to occur relatively soon could mitigate some of the adverse effects.<\/p>\n Additionally, Mexico may benefit from high U.S. tariffs on Chinese imports. This situation could create upside potential for growth as Mexico positions itself as an alternative manufacturing hub, leveraging its strategic location and skilled workforce. The evolving trade landscape offers both challenges and opportunities for Mexico\u2019s economy in the coming year.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Core inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n <1%<\/p>\n<\/td>\n 3.2% – 3.6%<\/p>\n<\/td>\n 3.5%<\/p>\n<\/td>\n 8% – 8.25%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:<\/strong>\u00a0Values are approximate. GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year change in the Consumer Price Index, excluding volatile food and energy prices, as of December 2025. Monetary policy is the Bank of Mexico\u2019s year-end target for the overnight interbank rate.<\/sup><\/p>\n Source:<\/strong>\u00a0Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Conditions are favorable for progress on inflation.<\/p>\n \u201cExpectations of further fiscal tightening and long-term inflation expectations that remain well anchored are likely to give the Bank of England conviction that inflationary pressures will subside.\u201d Shaan Raithatha, Vanguard Senior Economist.\u00a0\u00a0<\/p>\n An improved global outlook and greater-than-expected growth in the first quarter have led us to raise our forecast for full-year GDP growth to just above 1% from around 0.5%. Progress in U.S.-U.K. and U.S.-China trade relations underpin the more optimistic global view. First-quarter growth of 0.7% was driven by net exports and business investment, suggesting frontloading ahead of U.S. tariffs. We expect materially softer growth in the second quarter as an aftereffect of the frontloading and amid continued trade uncertainty.\u00a0<\/p>\n Core inflation remains elevated, with little progress made on services inflation or wage growth in recent months. That said, employment growth has softened materially, partly due to the government\u2019s decision in October 2024 to raise taxes for employers. Surveys point to some labour-market deterioration ahead. Expectations of further fiscal tightening and long-term inflation expectations that remain well anchored are likely to give the Bank of England (BoE) conviction that inflationary pressures will subside.<\/p>\n We continue to expect the BoE to cut the bank rate by 25 basis points each in the third and fourth quarters. That would leave the policy rate at 3.75% at year-end, a touch above our assessment of the neutral rate, or the policy rate that would neither stimulate nor inhibit growth.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Core inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n 1.1%<\/p>\n<\/td>\n 4.8%<\/p>\n<\/td>\n 2.9%<\/p>\n<\/td>\n 3.75%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:<\/strong>\u00a0Values are approximate. GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year change in the Consumer Prices Index, excluding volatile energy, food, alcohol, and tobacco prices, as of December 2025. Monetary policy is the Bank of England\u2019s bank rate at year-end.<\/sup><\/p>\n Source:<\/strong>\u00a0Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Global trade developments brighten prospects for Europe.<\/p>\n \u201cThe improved growth prospects and reduced risk of Chinese exports being rerouted to Europe decrease the risk of a material undershoot of the 2% inflation target.\u201d Shaan Raithatha, Vanguard Senior Economist.<\/p>\n Global trade developments have been positive for the euro area growth outlook. A U.S.-China tariff truce boosts global growth prospects and eases financial conditions, while initial U.S. agreements with the U.K. and China raise hopes for similar U.S.-euro area progress. We have increased our 2025 euro area growth outlook to just above 1%.\u00a0<\/p>\n The improved growth prospects and reduced risk of Chinese exports being rerouted to Europe decrease the risk of a material undershoot of the 2% inflation target set by the European Central Bank (ECB). Domestic inflationary pressures remain subdued, with target-consistent progress being made on the most stubborn parts of services inflation.\u00a0<\/p>\n Modest upgrades to our growth and inflation forecasts don\u2019t change our view on the ECB policy rate. We continue to foresee two more quarter-point cuts this year, which would leave the deposit facility rate at 1.75% at year-end from its current 2.25%. That would be slightly below our estimate of the euro area\u2019s neutral rate, or the interest rate level that would neither stimulate nor inhibit an economy.\u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Core inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n 1.1%<\/p>\n<\/td>\n 6.3%<\/p>\n<\/td>\n 2.1%<\/p>\n<\/td>\n 1.75%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:<\/strong>\u00a0Values are approximate. GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year change in the Harmonised Indexes of Consumer Prices, excluding volatile energy, food, alcohol, and tobacco prices, as of December 2025. Monetary policy is the European Central Bank\u2019s deposit facility rate at year-end.<\/sup><\/p>\n Source:<\/strong>\u00a0Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Progress on trade improves prospects for China\u2019s growth.<\/p>\n \u201cWith progress on trade negotiations, we expect policymakers to adopt a more reactive stance to further stimulus. Such an approach is also reflected in our monetary policy view.\u201d Grant Feng, Vanguard Senior Economist.\u00a0<\/p>\n Positive U.S.-China trade developments make us more optimistic about China\u2019s growth prospects. After the U.S. and China agreed on May 12 to lower tariffs on each other\u2019s goods for 90 days, we have increased our forecast for China\u2019s 2025 economic growth to 4.6%. However, risks to the downside remain significant, given the disruption to China\u2019s exports that has already occurred and an effective U.S. tariff rate on China that remains well above the rate before the April 2 U.S. tariff announcements.\u00a0<\/p>\n Although a renewal of heightened tensions can\u2019t be ruled out, progress on trade negotiations to date reduces the urgency for additional policy support. We expect policymakers to adopt a more reactive stance to further stimulus. Such an approach is also reflected in our monetary policy view. We foresee China\u2019s policy rate\u2014the seven-day reverse repo rate\u2014ending 2025 at 1.3%, higher than our previous forecast of 1.2%. The People\u2019s Bank of China announced a 10-basis-point cut to its policy rate, to 1.4%, on May 7. (A basis point is one-hundredth of a percentage point.)<\/p>\n We have lowered our forecast for headline inflation at year-end to just above zero as progress in trade talks eases pressure on prices of imported food, most notably U.S. soybeans. Meanwhile, uncertainty continues to weigh on energy prices. Our outlook for core inflation remains unchanged at 0.5%.\u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Core inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n 4.6%<\/p>\n<\/td>\n 5%<\/p>\n<\/td>\n 0.5%<\/p>\n<\/td>\n 1.3%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:\u00a0<\/strong>Values are approximate. GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year change in the Consumer Price Index, excluding volatile food and energy prices, as of December 2025. Monetary policy is the People\u2019s Bank of China\u2019s seven-day reverse repo rate at year-end.\u00a0<\/sup><\/p>\n Source:<\/strong>\u00a0Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Tariff challenges give BoJ a reason to be cautious.<\/p>\n \u201cThe Bank of Japan will continue to assess the downside risk to growth and inflation, given recent developments in U.S. tariff policy and their potential impact.\u201d Grant Feng, Vanguard Senior Economist.\u00a0\u00a0<\/p>\n The persistence of tariff challenges is likely to have a significant impact on Japanese exporters. While the direct effects of tariffs may be limited, the uncertainty they create can dampen business confidence and investment, leading to a more cautious approach by the Bank of Japan (BoJ) as it considers rate hikes.\u00a0<\/p>\n Still, a virtuous cycle of wages and inflation is likely to support the economy. Nationwide wage negotiations for unionised workers are tracking above last year\u2019s increases, which were the largest in 33 years. Prices continue to rise, and a structural labour shortage has buoyed capital expenditures as firms seek to enhance productivity. The cycle is likely to strengthen, keeping core inflation above the BoJ\u2019s 2% target throughout 2025.<\/p>\n However, the uncertainty surrounding U.S. tariff policy poses a notable hurdle for the BoJ in assessing its conviction about growth and inflation sentiment in the near term. As a result, we expect the BoJ to pause any rate hikes until the tariff situation stabilises. That said, the BoJ is likely to stick to its policy-normalisation cycle, given that domestic inflation momentum remains above target and wage-price dynamics are strengthening. The BoJ left its policy rate unchanged at 0.5% on May 1.<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n<\/th>\n GDP growth<\/strong><\/p>\n<\/th>\n Unemployment rate<\/strong><\/p>\n<\/th>\n Core inflation<\/strong><\/p>\n<\/th>\n Monetary policy<\/strong><\/p>\n<\/th>\n<\/tr>\n Year-end outlook\u00a0<\/p>\n<\/td>\n 0.7%<\/p>\n<\/td>\n 2.4%<\/p>\n<\/td>\n 2.4%<\/p>\n<\/td>\n 1%<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n Notes:<\/strong>\u00a0Values are approximate. GDP growth is defined as the annual change in real (inflation-adjusted) GDP in the forecast year compared with the previous year. Unemployment rate is as of December 2025. Core inflation is the year-over-year change in the Consumer Price Index, excluding volatile fresh food prices, as of December 2025. Monetary policy is the BoJ\u2019s year-end target for the overnight rate.\u00a0<\/sup><\/p>\n Source:\u00a0<\/strong>Vanguard.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n Note:\u00a0<\/strong>All investing is subject to risk, including the possible loss of the money you invest.<\/sup><\/p>\n About the Vanguard Capital Markets Model<\/strong><\/sup><\/p>\n The asset-return distributions shown here are in nominal terms\u2014meaning they do not account for inflation, taxes, or investment expenses\u2014and represent Vanguard\u2019s views of likely total returns, in U.S. dollar terms, over the next 10 years; such forecasts are not intended to be extrapolated into short-term outlooks. Vanguard\u2019s forecasts are generated by the VCMM and reflect the collective perspective of our Investment Strategy Group. Expected returns and median volatility or risk levels\u2014and the uncertainty surrounding them\u2014are among a number of qualitative and quantitative inputs used in Vanguard\u2019s investment methodology and portfolio construction process. Volatility is represented by the standard deviation of returns.\u00a0<\/sup><\/p>\n IMPORTANT:<\/strong>\u00a0The projections and other information generated by the Vanguard Capital Markets Model (VCMM) regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. VCMM results will vary with each use and over time.<\/sup><\/p>\n The VCMM projections are based on a statistical analysis of historical data. Future returns may behave differently from the historical patterns captured in the VCMM. More importantly, the VCMM may be underestimating extreme negative scenarios unobserved in the historical period on which the model estimation is based.<\/sup><\/p>\n The Vanguard Capital Markets Model\u00ae is a proprietary financial simulation tool developed and maintained by Vanguard's primary investment research and advice teams. The model forecasts distributions of future returns for a wide array of broad asset classes. Those asset classes include U.S. and international equity markets, several maturities of the U.S. Treasury and corporate fixed income markets, international fixed income markets, U.S. money markets, U.S. municipal bonds, commodities, and certain alternative investment strategies. The theoretical and empirical foundation for the Vanguard Capital Markets Model is that the returns of various asset classes reflect the compensation investors require for bearing different types of systematic risk (beta). At the core of the model are estimates of the dynamic statistical relationship between risk factors and asset returns, obtained from statistical analysis based on available monthly financial and economic data from as early as 1960. Using a system of estimated equations, the model then applies a Monte Carlo simulation method to project the estimated interrelationships among risk factors and asset classes as well as uncertainty and randomness over time. The model generates a large set of simulated outcomes for each asset class over time. Forecasts represent the distribution of geometric returns over different time horizons. Results produced by the tool will vary with each use and over time.<\/sup><\/p>\n The VCMM\u2019s primary value is its utility in analysing potential investor portfolios. VCMM asset-class forecasts\u2014comprising distributions of expected returns, volatilities, and correlations\u2014are key to the evaluation of potential downside risks, risk-return trade-offs, and the diversification benefits of various asset classes. Although central tendencies are generated in any return distribution, Vanguard stresses that focusing on the full range of potential outcomes for the assets considered is the most effective way to use VCMM output.<\/sup><\/p>\n The VCMM seeks to represent the uncertainty inherent in forecasting by generating a wide range of potential outcomes. The VCMM does not impose \u201cnormality\u201d on expected return distributions but rather is influenced by the so-called fat tails and skewness of modelled asset-class returns. Within the range of outcomes, individual experiences can be quite different, underscoring the varied nature of potential investment outcomes. Indeed, this is a key reason why we approach asset-return outlooks in a distributional framework.<\/sup><\/p>\n Indexes for VCMM simulations<\/strong><\/sup><\/p>\n The long-term returns of our hypothetical portfolios are based on data for the appropriate market indexes as of April 30, 2025. We chose these benchmarks to provide the most complete history possible, and we apportioned the global allocations to align with Vanguard\u2019s guidance in constructing diversified portfolios.<\/sup><\/p>\n Asset classes and their representative forecast indexes are as follows:<\/sup><\/p>\n Australia (Australian dollar)<\/sup><\/p>\n Equities<\/sup><\/p>\n This article contains certain 'forward looking' statements. Forward looking statements, opinions and estimates provided in this article are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends, which are based on interpretations of current market conditions. Forward-looking statements including projections, indications or guidance on future earnings or financial position and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance. There can be no assurance that actual outcomes will not differ materially from these statements. To the full extent permitted by law, Vanguard Investments Australia Ltd (ABN 72 072 881 086 AFSL 227263) and its directors, officers, employees, advisers, agents and intermediaries disclaim any obligation or undertaking to release any updates or revisions to the information to reflect any change in expectations or assumptions.<\/sup><\/p>\n \u00a9 2025 Vanguard Investments Australia Ltd. All rights reserved.\u00a0<\/sup><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n By Vanguard |
|---|