Vanguard’s top economist, Joe Davis, warns of major upheaval in the global economy due to massive global debt levels. Research shows an 80% chance that bond yields will exceed 7% if deficits continue to rise. AI-driven productivity could counteract the debt headwinds, but the future remains uncertain.

Davis predicts a greater than 80% chance of significant economic and market changes in the next three to five years. Advisors should consider asset allocation strategies in anticipation of potential high interest rates and bond vigilantes. Overweighting high-quality fixed income may be a wise move in the face of uncertainty.

Advisors should prepare for the upcoming AI boom by understanding the two phases of a technology cycle: production and consumption. Structural overweighting of value stocks is advised, even with bullish sentiments towards technology. The shift to the second half of the technology cycle may bring about changes in market dynamics.

There is an 80% likelihood of a change in the global outlook, signaling a potential end to US exceptionalism. Advisors should stay informed and adapt their strategies to navigate the evolving economic landscape. Subscribe to The Daily Upside for more financial advisor news and insights. Joseph Davis, Vanguard’s global chief economist and head of the Investment Strategy Group, discusses the impact of inflation on the global economy. He highlights the need for investors to stay diversified and patient during these uncertain times. Davis emphasizes the importance of long-term investment strategies to navigate market volatility.

Read more at finance.yahoo.com: Vanguard’s Joe Davis on AI and the ‘Second Half of the Chessboard’