Experts Challenge Goldman Sachs' Low Stock Return Forecast

Goldman Sachs' recent prediction that the S&P 500 will deliver an annualized nominal total return of 3% over the next decade has sparked debate among financial experts. While Goldman Sachs acknowledges the uncertainty inherent in forecasting future returns, some industry professionals have pushed back against this bearish outlook.


JPMorgan Asset Management (JPMAM) expects large-cap U.S. stocks to return an annualized 6.7% over the next 10-15 years, a more optimistic view than Goldman Sachs'. JPMAM's David Kelly believes that American corporations are well-positioned to grow margins, driven by improving productivity and strong profit margins.

Ed Yardeni of Yardeni Research agrees, stating that even Goldman Sachs' optimistic scenario might not be optimistic enough. He expects the S&P 500's average annual return to at least match the 6%-7% achieved since the early 1990s, potentially reaching 11% including reinvested dividends. Yardeni argues that a looming lost decade for U.S. stocks is unlikely if earnings and dividends continue to grow at solid paces, boosted by higher profit margins.

Datatrek Research co-founder Nicholas Colas is also bullish on the stock market's prospects. He believes that the next decade will see S&P returns at least as strong as the long-run average of 10.6%, and possibly better. Colas argues that historical cases of low returns were associated with specific catalysts, such as the Great Depression, oil shock of the 1970s, and the Global Financial Crisis. Without a clear crisis outlined in Goldman Sachs' research, it is difficult to square their conclusion with historical data.


In conclusion, while Goldman Sachs' forecast for low returns has garnered attention, other experts have presented more optimistic views. The debate highlights the uncertainty and challenges in predicting long-term stock market returns. Ultimately, investors must weigh these perspectives and make decisions based on their risk tolerance and investment goals.