What is Vanguard's recommended portfolio allocation for the next 10 years?

Vanguard is recommending a 70% bond, 30% stock portfolio for the next 10 years, a much more conservative approach than the classic 60/40 stock-bond split.

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Vanguard Forecasts Stocks to Underperform Bonds Over Next 10 Years

Q: Why are Wall Street banks warning about the stock market's future returns?

Top banks like Goldman Sachs and Morgan Stanley have warned that the S&P 500 has a high probability of underperforming bonds and even lagging inflation over the next decade, due to the current high valuation of the stock market.

Q: How does the Shiller PE ratio relate to future S&P 500 returns?

When the Shiller PE ratio of the S&P 500 has been around 37 in the past, as it is now, the following 10-year annualized returns have been anywhere from negative to just a few percent per year.

8 Aug

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Summary

Vanguard recommends 70% bonds, 30% stocks for ideal portfolio
Wall Street banks warn of high stock valuations, low future returns
Shiller PE ratio at 37 historically signals negative or low returns

Vanguard Forecasts Stocks to Underperform Bonds Over Next 10 Years

According to Vanguard's latest investment outlook, the asset manager is recommending a much more conservative portfolio allocation for the next 10 years. As of August 2025, Vanguard is advising investors to hold 70% of their money in bonds and only 30% in stocks - a stark contrast to the classic 60/40 stock-bond split.

This downbeat forecast for stocks is essentially echoing the message that top Wall Street banks have been sending since last year. Analysts at firms like Goldman Sachs and Morgan Stanley have warned that the S&P 500 has a high probability of underperforming bonds and even lagging inflation over the next decade. The key factor driving this gloomy outlook is the current high valuation of the stock market.

Historically, when the Shiller price-to-earnings (PE) ratio of the S&P 500 has been in the high 30s, as it is now, the following 10-year annualized returns have been poor, ranging from negative to just a few percent per year. With 10-year Treasury yields currently around 4.2%, the case for investing in risky stocks over safer government bonds becomes even weaker.

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