Stay Calm on Wall Street

One clear message for investors: don’t panic.

This sentiment stands out from a recent analysis of capital market expectations provided by major investment firms, which are forecasting returns for key asset classes over the coming decade. Following a year of solid stock market performance, a lot of these companies have actually lowered their long-term return predictions for stocks. This adjustment is especially significant for international equities. Generally, expectations suggest that non-U.S. stocks will outperform U.S. stocks in the next ten years, but the estimated returns are markedly lower than what was anticipated before the market surge in 2025 in both developed and emerging markets.

Interestingly, the return assumptions for stocks and bonds are becoming quite similar. While stock returns are projected to be slightly higher than those of bonds, the difference is only marginal in most forecasts. For more cautious investors who need liquidity in the short term, switching some stock investments for quality bonds may not be a major concession, given the lower volatility of bonds.

Using Forecasts Wisely

Of course, one might feel skeptical about trying to predict market movements, especially in the short term. However, it’s beneficial to have some return expectations when planning your finances. If long-term projections aren’t part of your strategy, it could be tricky to determine how much you should be saving or how much to withdraw during retirement. While historical returns could guide decisions, relying solely on those figures at specific times, like 2000 and now, may lead to overly optimistic planning. This, in turn, risks inadequate savings or excessive spending in retirement.

I’ve been compiling capital market predictions from investment firms annually. The aim is to make informed conclusions about reasonable return expectations for planning. These firms employ various methodologies to generate their forecasts, usually combining current dividend yields, valuations, and anticipated earnings growth. Conversely, for bonds, the simpler expectation is based on historical correlations between initial yields and returns over a decade, which is why their bond projections tend to converge, with variations mostly hinging on different timeframes.

It’s also vital to remember that these are medium-term forecasts, not long-term projections. The companies analyzed generally offer forecasts spanning seven to ten years, rather than thirty. Some like BlackRock and Vanguard do present broader forecasts, but they’re outliers in this regard. The forecasts are particularly relevant for potential investors or even newly retired individuals considering various risks they might face in the next decade.

Key Takeaways: The projected nominal return for the U.S. stock market over the next ten years is between 3.5% and 5.5%. Meanwhile, the forecast for U.S. bonds ranges from 3.8% to 4.8% as of October 31, 2025.

Vanguard’s recent projection for the U.S. stock market has seen a slight increase compared to last year. Now, they estimate that U.S. stocks will grow between 3.5% and 5.5% over the next ten years, a bump from 2.8% to 4.8% previously discussed. Nevertheless, this is still lower than the predicted range for U.S. bonds. On another note, Vanguard expects returns for non-U.S. equities to be considerably reduced, now estimated at 4.9% to 6.9%, down from 6.9% to 8.9% late last year, likely reflecting the recent strong performance of foreign equities in 2025.

Forecasts for sub-asset classes also emerged from Vanguard’s latest analysis. They were notably pessimistic about U.S. growth stocks, projecting a 10-year return range of 2.3% to 4.3%, while value stocks were estimated to return between 5.8% and 7.8%. Interestingly, small-cap stocks are anticipated to perform better than their large-cap counterparts, with expected returns of 5.1% to 7.1% compared to 3.4% to 5.4% for large-cap stocks.

Meanwhile, Vanguard’s return expectations for U.S. aggregate bonds have dipped slightly, now falling between 3.8% and 4.8%, down from 4.3% to 5.3% anticipated in 2024. They do, however, see potential for better returns in lower-quality bonds, albeit with higher volatility: U.S. high-yield bonds are projected to yield between 4.3% and 5.3%, while hedged emerging market bonds may vary from 5.1% to 6.1%.

Vanguard also offers 30-year forecasts for these asset classes, assisting in long-term planning, especially for those nearing retirement. These long-range projections suggest slightly improved return expectations for U.S. stocks at 4.4% to 6.4%, 6.2% to 8.2% for non-U.S. stocks, and 4.1% to 5.1% for U.S. aggregate bonds.

Key Takeaways: The expected nominal return for U.S. stocks over 10 years is 5.2%. For U.S. aggregate bonds, it is 4.1% as of September 30, 2025.

BlackRock’s forecast for stock returns has dipped slightly compared to predictions made at the end of 2024, showing a 10-year return just over 5% as of September 2025, down from 6.2%. Similarly, the 10-year expected return for non-U.S. stocks sees a modest reduction, standing at 7.1% compared to an earlier 8% forecast.

Fixed income projections have remained stable, with expectations set at 4.1% for U.S. Treasury bonds, slightly improved from last year’s 3.7%. Like Vanguard, BlackRock anticipates higher returns for higher-yield bonds, but these come with increased volatility—5.7% for U.S. high-yield and 4.7% for emerging-market debt.

Fidelity provides capital market assumptions covering a 20-year span (2025-2044), differing from the 10-year outlooks of other firms here. They forecast U.S. stocks to return a nominal rate of 5.8% over the next two decades, aligning roughly with earlier predictions. However, this is significantly lower compared to the average real return of 10% for U.S. stocks since 2005 and the 7% historical average since 1926. They attribute this to rising valuations in the stock market, expecting non-U.S. stocks to surpass U.S. stocks slightly at 6.7% nominal (4.1% real) and maintain a robust outlook for emerging market stocks at 8.1% nominal (5.5% real).

On the fixed income side, Fidelity anticipates a 20-year nominal return of 5.1% (2.5% real) for the Bloomberg U.S. Aggregate Bond Index by April 2025.

Key Takeaways: The nominal return for U.S. large-cap stocks is 6.7% over 10 to 15 years, and for U.S. aggregate bonds, it’s 4.8% as of September 30, 2025.

JPMorgan’s return expectations for stocks over the next 10 to 15 years reflect numbers similar to September 2024, generally higher. Their forecast for developed market stocks indicates a slight decrease from 8.1% to 7.5%, yet emerging market stocks have improved to 7.8% from 7.2% the previous year.

In terms of fixed income, the firm raised expectations compared to last year, projecting U.S. Treasury bonds to furnish a 4.8% return, which is up from 4.6%. The forecast for high-yield bonds has remained steady at 6.1% for 10 to 15 years, while emerging-market government bonds have increased to 6.3% from 5.8% a year ago.

Key Takeaways: The 10-year nominal return for U.S. large-cap stocks is 5.9%, and for U.S. aggregate bonds, it’s 4.8% as of October 31, 2025.

Mr. Schwab slightly downgraded the 10-year forecast for U.S. stocks to 5.9% from 6%. Similarly, projections for large-cap stocks outside the U.S. have also fallen to 7% from 7.1% in 2024. Consistent with others’ forecasts, they anticipate a rise of about 4.8%, a bit lower than previous expectations.

Key Takeaways: The nominal return for U.S. large-cap stocks over the next 10 years is 3.1%. The nominal return on U.S. aggregate bonds is 4.7% as of December 31, 2025.

Research Affiliates has slightly lowered its 10-year forecast for U.S. stocks to 3.1%, down from 3.4%. Like Vanguard, they predict that U.S. aggregate bonds will outperform stocks over the next decade and note that bond volatility will be much lower. The expectation is also for small-cap U.S. stocks to outperform large-cap stocks, with returns projected at 7.1% for small-cap stocks, compared to their larger counterparts. In line with earlier forecasts, non-U.S. stocks are also likely to perform better, with anticipated returns of 7.7% for developed market large-cap and 7.5% for emerging market stocks.

Key Takeaways: The real return for U.S. large-cap stocks over the next seven years is -6%, while U.S. bonds are anticipated at 1.3% as of November 2025.

As for GMO, they remain the most pessimistic about U.S. stock returns. They expect real returns for large-cap U.S. stocks to be -6% over the next seven years, a figure consistent with last year’s forecast.

In keeping with previous assessments, their outlook on non-U.S. stocks is somewhat brighter compared to U.S. stocks. For international large-cap stocks, they’re predicting a -0.7% real return, while small caps may see a 2.5% return and emerging market stocks, about 1%. Close to that, value stocks in emerging markets could achieve a remarkable 3.8% return, aligning closely with last year’s estimates.

The firm’s projections for fixed income also maintain stability, with expected real returns for U.S. bonds at 1.3% (though slightly reduced from 1.5% last year) and emerging market bonds around 1.5%.

Final Thoughts

Highlights: The expected nominal return for U.S. stocks over a decade is shaped by various firms’ forecasts, which reflect a blend of caution and tempered optimism amid market adjustments.