S&P 500 Next 10-years Annual Return Only 3%! Goldman Sachs Warns

For the past decade, the U.S. stock market has been one of the best-performing assets in the world, and the mantra of ALL IN on U.S. stocks has become second nature for many investors.

However, past returns do not guarantee future performance, and this reality may soon come to fruition. According to strategists at Goldman Sachs Group, as investors begin to shift their focus to other assets, including bonds, in search of better returns, the U.S. stock market is unlikely to maintain the above-average performance it has exhibited over the last ten years.

Analysts, including David Kostin, project that the S&P 500 Index will post an annualized nominal total return of just 3% over the next decade. This marks a significant decline from the 13% return seen in the past decade and is below the long-term average of 11%. They also estimate a roughly 72% chance that the benchmark index will underperform Treasury bonds, along with a 33% likelihood of lagging inflation through 2034.

Data shows that the S&P 500 outperformed global markets in eight of the last ten years. While the impressive past performance of U.S. stocks has been noteworthy, investors may need to prepare for a return to the mean in the future.

Furthermore, Goldman Sachs strategists suggest that any future gains in the U.S. market are likely to broaden from the Magnificent Seven tech giants to a wider range of stocks, with an equal-weighted S&P 500 Index expected to outperform the traditional S&P 500.

A decade is a long time, and as the saying goes, enjoy the present. A recent survey indicates that average investors expect the bullish trend in the U.S. stock market to continue into the latter part of 2024. The most significant factors influencing stock performance are not the outcomes of elections or Federal Reserve interest rate decisions, but rather the corporate earnings reports for Q3.