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AI's Global Boom: Developed Markets Lead the Way
23 Oct
Summary
- Economists predict AI productivity gains will be widely shared globally.
- Developed markets are better positioned to adopt and capitalize on AI.
- Vanguard forecasts international developed stocks to outperform U.S. stocks.
Economists anticipate that the economic benefits of artificial intelligence (AI) will be broadly distributed across the globe, with 54% of surveyed experts expecting widespread gains. However, a note of caution suggests that countries with more developed economies are better equipped to adopt AI and capitalize on these advancements. These nations possess stronger infrastructure and greater capacity for investment in AI solutions.
Vanguard's recent financial markets forecast echoes this sentiment, projecting that international developed-market stocks will outperform U.S. equities over the next 10 to 30 years. This outlook suggests that companies in wealthier, higher-income countries, which can leverage AI to enhance existing operations, may see greater returns than those in emerging markets. Emerging economies with significant outsourced business services could also face risks from AI-driven job displacement.
For investors aligned with these projections, focusing on international ETFs that concentrate on developed markets may be a prudent strategy. Funds such as the Vanguard FTSE Developed Markets ETF (VEA) and the iShares Core MSCI EAFE ETF (IEFA) are examples of such investment vehicles. Conversely, investors seeking to avoid potential underperformance might steer clear of emerging markets ETFs like the iShares MSCI Emerging Markets ETF (EEM).
