Our base case for 2023 includes a global recession brought about by policymakers’ efforts to control inflation.
Vanguard economic and market outlook for 2023: Beating back inflation

In our 2022 economic and market outlook, we outlined how we believed the removal of policy accommodation would shape the economic and financial market landscape. Policy has in fact driven conditions globally in 2022, one of the most rapidly evolving economic and financial market environments in history. But one fact has been made abundantly clear: So long as financial markets function as intended, policymakers are willing to accept asset price volatility and a deterioration in macroeconomic fundamentals as a consequence of fighting inflation.
Our outlook in brief:
- The stabilization of global consumer behavior, cyclical acceleration in demographic and geopolitical trends, and rapid monetary tightening suggest a more challenging macroeconomic environment in 2023 that, in our view, will help bring down the rate of inflation.
- Global conditions today and those anticipated in the coming months are similar to those that have signaled global recessions in the past. Energy supply-and-demand concerns, diminishing capital flows, declining trade volumes, and declining output per person mean that the global economy will likely enter a recession in the coming year.
- Inflation continued to trend higher in 2022 across most economies as supply chains have yet to fully recover from pandemic-related distortions and as demand has been buoyed by strong household and business balance sheets. Our base case of a global recession in 2023 signifies slowing consumer demand and modest job losses that should put inflation on a downward trend through 2023, with central bankers reasonably looking to achieve their 2% inflation targets in 2024 or 2025.
- Although rising interest rates have created near-term pain for investors, higher starting rates have raised our return expectations for U.S. and international bonds. We now expect U.S. and international bonds to return 4%–5% per year over the next decade.
- Globally, our 10-year equity return expectations are 2.25 percentage points higher than they were at this time last year. From a U.S. investor’s perspective, our Vanguard Capital Markets Model® projects higher 10-year annualized returns for non-U.S. developed markets (7.2%–9.2%) and emerging markets (7%–9%) than for U.S. markets (4.7%–6.7%).
Learn more about our views on the global economic outlook, inflation, monetary policy, and the implications for investors.
Vanguard's 2023 economic and market outlook is available
Related links:
- Our investment and economic outlook for November 2022 (article, issued October 2022)
- Tenacity through turmoil (article, issued October 2022)
- Markets seek certainty that policy will succeed (article, issued October 2022)