The 10-year outlook for the global stock market is likely to be attractive despite elevated market volatility, below-average growth projections and short-term interest rates around 0% in the U.S. That’s according to research released Tuesday by Vanguard. 

The mutual fund manager estimates that global equity markets over the next 10 years will earn nominal returns in the range of 6% to 9%, modestly below the 9.8% historical average earned since 1926. Even when adjusted for inflation, a global equity portfolio has a 50% chance of earning “at least the 6% average annualized real return that has been observed since 1926,” Vanguard said in its report. 

Vanguard found that the expected returns between U.S. and non-U.S. equity portfolios did not vary greatly. The forecast of 6% to 9% is basically the same for both U.S. and non-U.S. stock portfolios on a 10-year basis, said Roger Aliaga-Diaz, an economist in the Investment Strategy Group at Vanguard.

The mutual fund shop says that bonds should be used for diversification and income-generating purposes. While it expects bonds to post relatively muted nominal returns, they will offer diversification because correlations to U.S. stocks are expected to be low.

Vanguard estimates that the 10-year median return of the broad taxable U.S. bond market will range between 1.5% and 2%, which resembles the 1950s and 1960s, a period of low inflation and low bond yields similar to the environment today, Aliaga-Diaz said.  

Vanguard also provides its outlook for U.S. economic growth, inflation and interest rates.  It expects the U.S. economy to grow at a slightly below-average 2% to 3% pace due to “continuing concerns about housing, consumer debt, and fiscal austerity in Europe and the United States,” it said. It estimates U.S. inflation to average in the 2% to 3% range over the next few years. And it sees interest rates, after adjusted for inflation, as “likely to remain negative for years,” which is unfortunate for savers, the “sacrificial lambs of monetary policy,” it says.

Margarida Correia writes for Bank Investment Consultant.