(Bloomberg) — U.S. stocks are unlikely to maintain their above-average performance of the past decade as investors turn to other assets, including bonds, for better returns, Goldman Sachs Group Inc. strategists said. (GS).
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According to an analysis by strategists including David Kostin, the S&P 500 Index (^SPX) is expected to post a nominal annualized total return of just 3% over the next decade. That compares with 13% in the past ten years, and a long-term average of 11%.
They also see a roughly 72% chance that the benchmark index will chase Treasuries, and a 33% chance that they will lag inflation through 2034.
“Investors should be prepared for stock returns over the next decade that are at the lower end of their typical performance distribution,” the team wrote in an Oct. 18 note.
US stocks have risen after the global financial crisis, driven first by near-zero interest rates and later by a commitment to resilient economic growth. According to Bloomberg data, the S&P 500 is on track to outperform the rest of the world in eight of the past 10 years.
Still, this year’s 23% rebound was concentrated in a handful of the largest tech stocks. Goldman strategists said they expect returns to broaden and the equal-weighted S&P 500 to outperform the market-cap-weighted benchmark over the next decade.
Even if the rally remained concentrated, the S&P 500 would post a below-average return of about 7%, they said.
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