Goldman Sachs strategists have predicted that it will be challenging for U.S. stocks to achieve returns as high as the past decade, where returns were above average. According to a report by Bloomberg on the 21st, Goldman Sachs estimates that the S&P 500 index will likely see an average annual nominal total return of just 3% over the next 10 years. This is significantly lower compared to the previous decade’s average return of 13% and the long-term average of 11%.
The strategists also suggest that there is about a 72% chance that the S&P 500’s returns will be lower than that of government bonds by 2034, and a 33% chance they will be lower than inflation. The team at Goldman Sachs pointed out that investors should brace for stock price gains that are on the lower end of the typical stock distribution over the next decade.
U.S. stocks have seen an upward trend since the global financial crisis, driven by near-zero interest rates after 2020 and resilient economic growth since last year. According to data collected by Bloomberg, the S&P 500 has recorded stock returns surpassing the rest of the world except for 2017 and 2022 since 2015.
This year, the 23% rebound in the S&P 500 is concentrated among a few large tech stocks. Goldman Sachs strategists expect stock performance to broaden across various sectors, with the equal-weighted S&P 500 outperforming the market-cap-weighted benchmark over the next 10 years. They also anticipate that even if the rally continues, the S&P 500 will record returns around 7%, which is lower than the average of the past decade.
Meanwhile, Goldman Sachs had issued a similar report in October last year. According to Bloomberg’s latest survey, market participants expect the U.S. stock rally to continue through the year’s final stretch, bolstered by strong corporate earnings.