If you don’t like the neighborhood, wait 10 minutes.
That’s an old saying about New York City, but it applies these days to the bewildering financial markets, too. You may not like what you’re experiencing but everything is changing so rapidly that it’s smart to avoid quick judgments.
For better or worse, it’s a new world every time you look. In times like these, when major government policies shift overnight, making long-term economic projections is quixotic, at best. Still, some people do it for a living.
I spoke with one of the most thoughtful, Joseph H. Davis, global chief economist of Vanguard, the giant asset management company. He has written a new book, “Coming Into View: How A.I. and Other Megatrends Will Shape Your Investments.”
It takes a decades-long perspective. At its core is Vanguard’s proprietary model, which estimates a range of potential outcomes in what Mr. Davis calls a tug of war between artificial intelligence and an aging society.
In a nutshell, Vanguard projects two main possibilities:
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Technological breakthroughs, including but not limited to A.I., create a thorough revolution in productivity, transforming “how we do our jobs, driving faster growth and improved standards of living.” The company estimates a 45 to 50 percent chance that this will happen.
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A.I. will be disappointing and won’t outweigh negative trends like rising fiscal deficits and an aging population. This version of reality will be characterized by inflation and economic stagnation. Vanguard assigns this outcome a 35 to 45 percent probability.
“There are two paths,” Mr. Davis told me, “but only one’s going to play out.” Classic diversification, plus a tilt toward beaten-down value stocks, can protect you, even if A.I. is spectacularly successful, he said. “You don’t have to pick sides, you don’t have to be a hero,” he said.
For those who use broad index funds and hold only U.S. securities, the Vanguard model projects these two disparate sets of annualized returns from 2026 through 2035:
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In the “deficits dominate” world, bonds outperform equities during a miserable decade for the stock market. Ten-year Treasuries return 6.5 percent annualized versus 2.3 percent for the S&P 500.
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In the optimistic, “A.I. transforms” version, stocks rule. The S&P 500 returns 9.8 percent annualized versus 3.9 percent for 10-year Treasuries.
This is forecasting, even if it includes alternate projections, and I take all economic and market forecasts with many grains of salt. But I respect this effort.
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