Bitcoin News Today: Vanguard Warns U.S. Stocks 49% Overvalued Urges 60% Fixed-Income Rebalancing

Vanguard Group’s President and Chief Investment Officer, Greg Davis, has issued a stark warning to investors, urging a strategic reallocation away from U.S. equities as their valuations reach historically extreme levels. During a recent interview with Fortune, Davis outlined a cautious outlook for the U.S. stock market, contrasting sharply with the optimistic narratives of many Wall Street firms and media pundits. He emphasized that the market’s recent surge—driven by speculative bets on deregulation, tax cuts, and AI-driven productivity—has inflated valuations to unsustainable levels, likely to curtail future returns [1].

Davis, a 25-year Vanguard veteran, reiterated the firm’s long-standing philosophy of cost-efficient, diversified index investing, a model pioneered by Vanguard founder John Bogle. Over the past decade, more than 80% of Vanguard’s ETFs and indexed mutual funds outperformed their peer groups, largely due to minimal expense ratios. With $10 trillion in assets under management, Vanguard now commands 28% of the U.S. mutual fund and ETF market, reflecting its dominance in passive investing [1].

Central to Davis’s argument is the notion that U.S. equities have become a “victim of their own success.” He highlighted that the S&P 500’s trailing price-to-earnings ratio of 29.3, when adjusted for cyclical factors using Robert Shiller’s CAPE metric, suggests stocks are 49% overvalued relative to historical norms. Corporate profits, which soared at a breakneck pace in recent years, are expected to decelerate, failing to offset the valuation premium. “Our projections indicate U.S. equity returns will fall to 3.8–5.8% annually over the next decade,” Davis stated, a stark contrast to the 12.4% average annual return over the past ten years [1].

The shift in asset allocation is equally critical. Davis criticized the imbalance caused by the prolonged bull market, which has skewed traditional 60-40 portfolios (60% stocks, 40% bonds) toward overexposure in U.S. equities. He noted that investors who avoided rebalancing now hold portfolios closer to 80-20 in favor of stocks, with U.S. equities accounting for up to two-thirds of holdings. This concentration, he argued, increases risk without commensurate reward. “With bond yields rising, the return differential between equities and bonds is narrowing,” Davis said, suggesting that a 60% bond allocation could yield similar returns to a 20% U.S. stock stake but with significantly lower volatility [1].

Vanguard’s recommended portfolio rebalancing includes a 60% fixed-income allocation, 20% international equities, and just 20% U.S. stocks. For fixed income, Davis endorsed Vanguard’s Total World Bond ETF (BNDW), which combines global bonds, and for equities, the FTSE All World ex US ETF (VEU) for international exposure. He projected that international equities could average 7% annual returns over the next decade, outpacing U.S. equities’ 5%. The strategy aims to mitigate risks from a potential U.S. market slowdown while capitalizing on global opportunities [1].

Davis also distanced Vanguard from speculative assets like cryptocurrencies, calling Bitcoin a “speculative bet” rather than a core investment. While acknowledging blockchain’s potential to reduce financial sector costs, he rejected the idea that Bitcoin’s limited supply justifies its value, given the infinite possibilities of new crypto assets. “Bitcoin doesn’t generate cash flows or dividends,” he emphasized, adding that Vanguard has no plans to launch a Bitcoin fund [1].

The cautionary advice reflects Vanguard’s commitment to its cooperative model, where investors own the firm and fees are continually reduced to reflect economies of scale. Davis highlighted Vanguard’s recent $350 million fee cut across 68 funds, underscoring the firm’s belief in long-term value creation through cost control rather than speculative gains [1].

Source: [1] [title] [The investment chief at $10 trillion giant Vanguard says it’s time to pivot away from U.S. stocks] [url] [https://fortune.com/2025/07/24/the-investment-chief-at-10-trillion-giant-vanguard-says-its-time-to-pivot-away-from-u-s-stocks/?itm_source=parsely-api]