AI's transformative potential: Will productivity gains translate to investment growth?

Rapid evolution has increased AI’s potential to become a transformative economic force, Vanguard’s 2026 economic and market outlook emphasizes, with promising implications for productivity across industries. Although today’s AI leaders dominate headlines, tomorrow’s winners may look very different. The outlook for markets is nuanced. Equity markets may remain exuberant but face rising risks whereas high-quality bonds offer compelling real returns. 

AI Exuberance: Economic Upside, Stock Market Downside (2026 Outlook white paper) 

Much like electricity, railroads, and the internet before it, AI is driving a structural shift that demands significant capital investment to retool the economy for a new era. This broad-based, sustained trend makes for a nuanced outlook. 

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AI’s Economic Growth Effects (Video)

Artificial intelligence may reshape the global economy. According to Vanguard Global Chief Economist Joe Davis, AI investment may lead to stronger-than-expected growth in the U.S. and other leading economies. This could stabilize labor markets and even result in fewer interest rate cuts by the Federal Reserve than many anticipate. 

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High Stock Valuations and a Case for Bonds (Video)

There’s been considerable hype about AI. But even the most transformative technology needs profitable business models to succeed. Qian Wang, Vanguard Global Head of Capital Market Research, explains in this short video that although tech earnings have been strong, valuations may have outpaced fundamentals—raising risks of a market pullback.

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Why We’re Underweight Stocks (Video)

Investors may not be adequately rewarded for equity risk in the years ahead. In this short video, Roger Aliaga-Díaz, Vanguard Global Head of Portfolio Construction, shares why Vanguard is leaning more conservative in its time-varying asset allocation portfolio—favoring a 40% stock and 60% bond mix over the traditional 60/40 approach. 

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Bonds Remain in Favor in Time-Varying Portfolio (Article)

Vanguard’s dynamic portfolio counters assumptions that AI-driven productivity gains guarantee perpetual earnings growth. By emphasizing U.S. value and developed international equities, it seeks long-term benefits as AI’s impact broadens. A strong fixed-income allocation adds income, resilience, and diversification—helping investors stay invested through evolving market conditions. 

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Vanguard’s Capital Markets Return Forecasts (Article)

Even at current stretched valuations, rising earnings growth could provide momentum for stocks in the near term. However, Vanguard’s conviction is growing stronger that long-term prospects for U.S. equities are subdued. 

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