It won’t go on like this: Goldman Sachs strategists warn that after a decade of gains in the S&P 500 index, US stocks will not be able to maintain their high performance, Bloomberg reported today. The reason: investors will look for excess returns in other assets, including bonds.
The S&P 500 index is expected to generate an average annual return of only 3% over the next 10 years, according to an analysis by strategists at the investment bank. This is compared to 13% in the last decade and the long-term average of 11%. Since the beginning of the year, the index has added 23%.
In addition, Goldman Sachs estimates that there is a 70% chance that the index will lag behind government bonds. “Investors should be prepared in the next decade for returns (from stocks) that will be at the bottom of their normal performance range,” says the company’s report published a few days ago.
The large stocks will lose their influence on the index
American stocks have enjoyed an upward trend since the subprime crisis that broke out in the USA in 2008, and globalization only added to it a very contagious effect. Following this, central banks lowered interest rates to zero and took additional monetary expansion measures, which led to sharp price increases, both in government bonds and in “H the corporations, and to these were added the efficiency of the American companies, the technological innovation and the phenomenal returns of the technology giants that pulled the entire market after them. According to Bloomberg data, the S&P 500 is on track to give excess returns compared to the rest of the world in eight of the last 10 years.
Goldman’s strategists estimate that the large technology stocks, which are responsible for the index’s impressive jump this year, will lose their concentrated influence on the S&P 500 in the coming decade, and the returns are expected to expand to other sectors. Even if the rally remains focused on the large tech stocks, the S&P 500 will produce below-average returns.
Nevertheless, in the latest Bloomberg survey, investors expect the rise in US stocks to continue until the end of 2024. The results of US companies are seen as the main factor driving the market, more than the results of the presidential elections or even the monetary policy of the Federal Reserve.
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