Goldman Sachs strategists have indicated that U.S. stocks are unlikely to maintain their above-average performance of the past decade as investors increasingly turn to bonds and other assets for better returns. Analysts, including David Kostin, project that the nominal annual total return for the S&P 500 over the next ten years will be slightly above 3%, compared to 13% over the previous decade and a long-term average of 11%.
They also estimate a 72% probability that the index's returns will trail U.S. Treasury bonds and a 33% likelihood of falling behind inflation by the end of 2034. In a report released on October 18, the team advised investors to prepare for stock returns that may align with the lower end of typical performance distributions over the next decade.
Following the global financial crisis, the U.S. stock market surged, initially driven by near-zero interest rates and later by confidence in economic growth resilience. Data compiled by Bloomberg shows the S&P 500 outperformed other global regions in eight of the last ten years. However, this year's 23% rebound has largely centered on a few large technology stocks.
Goldman Sachs strategists suggest that over the next decade, returns will diversify across the broader market. They predict that the equal-weighted S&P 500 index will outperform the market-cap-weighted benchmark index. Even if gains remain concentrated, they anticipate the S&P 500's returns to be below average.
