In October, investors expected stocks to return 4.4% over the coming 12 months, 1.1 percentage points lower than in August. Expected returns dropped below the historical average of this survey by 0.1 percentage points but remained significantly above the October 2022 low of 0.6%. Expected returns for the long run (defined as the next 10 years) held relatively steady at 7%.

“Investor confidence followed the market downward in October,” said Xiao Xu, an analyst in Vanguard Investment Strategy Group. “The tide of investor sentiment appears to be turning away from summertime highs.” 

Investors’ expectations for average GDP growth over the coming three years held steady at 3.1%, and expectations for the coming decade went up slightly to 3.8%.

“Overall, investors’ sentiment for the economic outlook remain upbeat,” said Xu. “The healthy 4.9% increase in real GDP in the third quarter validated their economic optimism. The U.S. economy and investors have proven resilient in the face of a high interest rate environment.”

In October, investors believed there was a 6% chance that the stock market would drop by 30% or more over the coming 12 months. This was 0.9 percentage points higher than the reading for August and higher than our survey’s historical average of 5.5%.

Investors raised the odds of an economic disaster by 0.5 percentage points to 5.9%, reversing the downward trend of the past six months. However, both elements of the Fear and Doubt Index are still trending well below the peaks observed in 2022.

“Investors’ fear about market and economic disasters is on the rise in the midst of geopolitical concerns, inflation, and high interest rates,” said Andy Reed, head of investor behavior research at Vanguard. “Investors are less certain about where things will land in the near future; market and economic expectations are moving in opposite directions. Staying confident in the face of uncertainty is no easy task, but investors aren’t panicking just yet.”

Vanguard’s Investor Research & Insights team has been collecting Vanguard investor expectations for U.S. stock market returns and U.S. GDP growth since February 2017. The survey runs every other month, in February, April, June, August, October, and December. A special survey was conducted in March 2020 during the pandemic-induced market crash.

The survey poses 13 brief questions about U.S. stock market and economic growth expectations to a random sample of 2,000 Vanguard personal and 401(k) investors. It is conducted in partnership with academic researchers Stefano Giglio of the Yale School of Management, Matteo Maggiori of the Graduate School of Business, Stanford University, and Johannes Stroebel of the Stern School of Business, New York University.

The survey respondents are a random sample of U.S.-based Vanguard investors invited by email to participate. About 80% of the sample is drawn from our personal investor clients and about 20% from participants in employer-sponsored defined contribution retirement plans. To be included, investors also must have opted in to receive Vanguard statements by email, be over age 21, and have total Vanguard assets of at least $10,000. Overall, this sample group holds about $2 trillion in assets at Vanguard. We receive about 2,000 responses from investors in each period the survey is conducted.

The responses may be of use to advisors, plan sponsors, researchers, and other investors wishing to gauge current sentiment among individual households and calibrate clients’ thoughts compared with the market.

• Labor market pulse: Hiring softens; more so for women (article, issued October 2023)
• Our investment and economic outlook (article, issued October 2023)
• Webinar replay: The drivers behind our global market outlook (video, issued October 2023)
• Investor Pulse: Stable outlook sustains optimism in August (article, issued September 2023)