Us Wall Street dark clouds are gathering, according to the latest report by Goldman Sachs. After years of outperforming the rest of the world, the U.S. stock market is headed for decline over the next decade.
Will US stock prices continue after three years of strong bull market? According to the latest analyzes by Goldman Sachs, this trend may soon reverse, writes businessinsider.de.
In an analysis published on Tuesday, the bank provided its forecast of annual rates of return on global stock markets. Analysts expect that the American market will bring an annual rate of return of 6.5%. over the next 10 years – this is the worst forecast in the world for the next decade.
This is also a significant deviation from the historical trend of the S&P 500 index (comprising the largest companies on Wall Street), which achieved an average annual rate of return of 10% throughout its operation.
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Bad news for investors. “The worst market in the world”
What is the reason for the bank's negative forecast? First, U.S. stock valuations are among the highest in the world. This partly explains the downside risk for the US market.
Goldman believes the S&P 500 index could achieve annual returns of 3 to 10 percent. over the next 10 years, depending on whether markets move up or down.
The bank added that over the next decade, US stock valuations will decline by 1%. annually. “If profitability and/or valuations of the largest companies deteriorate and a new group of 'superstars' do not emerge, returns in the broader market will likely suffer as the strongest stocks begin to decline,” the analysts wrote, presenting a worst-case scenario for the US market.
Second, US corporate profits are already high. This means the profitability of large companies is unlikely to improve significantly in the future, the bank says.
“Corporate profits are unlikely to continue to be as strongly influenced by the factors of the last few decades,” the analysts write, noting that net profit margins and returns on equity of S&P 500 companies are near record levels.
USA versus the rest of the world. Forecasts for investors
However, higher earnings growth is expected in other global markets. Goldman Sachs estimates annual U.S. earnings per share growth at about 6 percent. in the base scenario. For comparison, for emerging markets and Asian shares (excluding Japan) it is 9 percent:
- Emerging markets – 10.9 percent
- Asia (excluding Japan) – 10.3 percent
- Japan – 8.2 percent
- Europe – 7.1 percent
- USA – 6.5 percent
Strategists believe investors should diversify their portfolios, especially into emerging market stocks.
“We expect higher nominal GDP growth and structural reforms to benefit emerging markets, and the long-term benefits of AI are likely to be broader than those associated with U.S. technology,” the analysts wrote, noting, however, that growth will depend on how AI impacts the global macroeconomic landscape.
In June, more than half of global investors surveyed by Bank of America said they expected stocks in other markets to outperform U.S. stocks over the next five years.
Source: businessinsider.de
