Analysts at Goldman Sachs, under the leadership of David Kostin, project an annualized return of only 3% for the S&P 500 index over the next ten years. This prediction falls significantly short of the 13% average returns observed over the past decade and the long-term norm of 11%. Some analysts are contesting this outlook.
Ben Carlson from Ritholtz Wealth Management commented, “Seeing returns this low over a decade is uncommon, but it’s possible. About 9% of all rolling 10-year annual returns have been 3% or lower… So while it’s unlikely, it can occur.”
According to Bloomberg, JPMorgan Asset Management anticipates U.S. large-cap stocks to “achieve an annualized return of 6.7% over the next 10-15 years.” David Kelly from JPMorgan remarked, “I am more assured in our figures than theirs for the upcoming decade.
We believe that American companies are intense — they possess sharp strategies and excel at enhancing margins.”
Ed Yardeni from Yardeni Research also conveyed a positive outlook, highlighting strong productivity and profit margins.
Rebuttal to low S&P 500 projections
“If the productivity growth surge continues as we anticipate, the S&P 500 should at least reach the 6%-7% average returns seen since the early 1990s.
It should be closer to 11%, factoring in reinvested dividends,” Yardeni stated. Nicholas Colas, co-founder of Datatrek Research, noted that periods with returns below 3%, such as during the Great Depression and the Global Financial Crisis, typically had identifiable disasters causing them. In the absence of a clear impending crisis, Colas contends that it’s difficult to reconcile the 3% forecast with nearly a century of historical results.
Barry Ritholtz of Ritholtz Wealth Management expressed skepticism about the forecast, stating, “Making predictions about one type of economic calamity or another over the next decade isn’t too far-fetched. However, claiming annual returns of 3% for an entire decade demands a particular and substantial crisis.”
Forecasting stock market performance in the coming decade proves difficult. Both hopeful and cautious views possess legitimate perspectives, but time will ultimately reveal the true outcomes.
As Ritholtz remarked, “I have no idea what the forthcoming decade will hold for S&P 500 returns, but neither does anyone else.”
