Goldman Sachs Predicts Significant Drop in U.S. Stock Market Returns

Goldman Sachs analysts anticipate a sharp decline in returns from the U.S. stock market over the next decade.

The analysts predict a drop from an average of 13% per year to a mere 3% by 2034, marking the end of an extraordinary era of market growth.

The analysts project a 72% likelihood that U.S. Treasury bonds will outperform stocks until 2034, cautioning investors about a potential 33% chance that equities will fail to keep pace with inflation. In their October 18 report, the team emphasized the need for investors to brace for lower equity returns in the coming years.

Despite a remarkable 23% growth in 2024, largely driven by major tech firms, Goldman Sachs believes this trend is shifting. They expect a more balanced contribution to returns from various sectors, suggesting that the equal-weighted S&P 500 may outperform the current market-cap-weighted index.

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Bloomberg Markets Live Pulse highlights that company earnings are becoming more critical than external factors like presidential elections or Federal Reserve policies. The outlook remains subdued; even if technology companies retain their strength, returns may only reach 7%, significantly lower than historical averages.

The S&P 500 has outperformed global markets in eight of the last ten years, but this trend is likely to change. Investors may need to adopt new strategies to navigate the evolving market landscape, as the expected decline from the long-term average of 11% to 3% signals a substantial shift in how market gains are realized.

Alexander Stefanov