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US Stocks Will Be Last in Global Rankings in Next 10 Years, Goldman Says

by Michael Brown - Business Editor
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Goldman Sachs Predicts US Stock Market to Lag Globally Over Next Decade

The US stock market, a long-time leader in global returns, is projected to underperform international markets over the next ten years, according to a new forecast released today by Goldman Sachs.

Analysts at the bank predict US equity markets will deliver annualized returns of 6.5% over the next decade – the lowest among global markets. This marks a significant shift from the historical average of 10% annual returns seen with the S&P 500. The forecast stems from a combination of high valuations, limited potential for further earnings growth, and comparatively stronger growth prospects in other regions.

Goldman Sachs points to current valuations as a key factor, with the S&P 500 trading at a 12-month forward price-to-earnings multiple of around 21. “If the profitability and/or valuations of the largest companies falter, unless another cohort of ‘superstars’ emerges, returns for the broad market will likely be hampered as today’s largest stocks fall back to earth,” analysts wrote. Furthermore, corporate earnings in the US are already robust, with the blended net profit margin for the third quarter around 13.1%, above the five-year average, suggesting limited upside. This situation could impact investor portfolios and necessitate a reevaluation of asset allocation strategies; learn more about asset allocation from Investopedia.

The bank anticipates annualized earnings per share growth of approximately 9% in emerging markets and Asian stocks (excluding Japan), exceeding the projected 6% growth in the US. Strategists recommend investors consider diversifying portfolios with a focus on emerging markets, citing potential benefits from nominal GDP growth, structural reforms, and the broad impact of artificial intelligence. This prediction aligns with growing sentiment among global investors, with a Bank of America survey from June revealing that over half anticipate international stocks outperforming US equities in the next five years.

Goldman Sachs indicated that the forecast range for the S&P 500 could vary between 3% and 10% annually, depending on market conditions, and will continue to monitor global economic factors as they evolve.

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