Goldman Sachs predicts the S&P 500 will see a much lower annual return of just 3% over the next decade, compared to the 13% it delivered over the last ten years. This new estimate is a significant drop from the widely expected return of around 6%.
David Kostin, Goldman’s chief U.S. equity strategist, explained that the forecasted 3% nominal return ranks in the seventh percentile of ten-year returns dating back to 1930. The team acknowledges a wide range of possibilities, predicting outcomes as high as 7% or as low as a 1% decline, given the uncertainties of long-term forecasts.
Goldman also highlights that while the stock market saw above-average returns of 13% annually in the past decade, driven by near-zero interest rates and a strong economy, future returns are expected to be more modest. Investors should prepare for stock returns to be at the lower end of typical performance going forward.
The S&P 500 has consistently outperformed global markets in eight of the last ten years, especially following the financial crisis. However, much of this year’s 23% rise has been driven by a small number of large tech companies. Goldman believes that returns will spread more evenly across sectors, with the equal-weighted S&P 500 expected to outperform the market-cap weighted version in the coming decade.
Even if the market remains concentrated, the S&P 500 is projected to deliver below-average returns of about 7%, according to Goldman’s team.
USA has surpassed India to become the world’s most expensive market, pushing India to second place.
Brian Moynihan, CEO of Bank of America, has raised alarms about the U.S. national debt, which has surpassed $35.7 trillion. If this debt were divided equally, each American would owe more than $105,000. Moynihan, along with other influential leaders such as Jamie Dimon and Federal Reserve Chair Jerome Powell, is calling on political leaders to tackle this growing debt issue. However, their warnings seem to be falling on deaf ears, especially as proposed plans from potential future presidents like Donald Trump and Kamala Harris could further increase the debt.
Inputs from Goldman Sachs and Bloomberg reports.
