Vanguard recently released their most recent annual 10-year forecast as of mid-November 2024 (effectively the beginning of 2025). The beginning of the year is the time for forecasts, and that also makes it a good time to remind ourselves how badly they can be wrong and how you shouldn’t really use them for anything.
Let’s look back at how those same forecasts performed from 2011-2021, with confidence ranges within the 25th and 75th percentiles. I have some old images saved from when Vanguard gave us an update in 2021.
For US Stocks between 2011-2021, their forecast in 2011 was roughly between 6% and 12% annually for US stocks, for a median around 9%. That a wide band! The actual return? 13.4%. As of early 2025, we are still outside their confidence bands.
For Global ex-US Stocks between 2011-2021, their forecast in 2011 was roughly between 6% and 11% annually for US stocks, for a median around 8.5%. The actual return? 4.0%. As of early 2025, we are still outside their confidence bands here as well.
I’m not trying to pick on Vanguard here, but they do release these things with a certain degree of seriousness and brand authority. But honestly, I wish they wouldn’t. I mean, sooner or later they’ll be correct, but how could you possibly attribute that to skill and not luck?
I’m going to include a copy of their late 2024 10-year forecasts (close to the start of 2025) here because they usually delete the post after a couple of years. This way, we can look back again in the future. For this chart, the ranges are their median forecast with a fixed 2% range of confidence for stocks and 1% range for bonds.
Notably, the 10-year median return forecast is 3.8% for US stocks, 7.9% for Global ex-US stocks, and 4.8% for US total bond. This table includes their percentile confidence ranges.
This all reminds of me of the old joke: How can you tell economists have a sense of humor? They use decimal points.
