Two of Wall Street’s biggest banks disagree over how stocks will perform over the next decade.
Back in October, Goldman Sachs’s forecast for the future of equities was ugly. Bloomberg reports:
The S&P 500 Index is expected to post an annualized nominal total return of just 3% over the next 10 years, according to an analysis by strategists including David Kostin. That compares with 13% in the last decade, and a long-term average of 11%.1
Yuck.
That is not likely beat inflation.
Strategists over at JP Morgan Chase have a brighter outlook. Bloomberg sums it up:
They’re anticipating that US large-cap equities — the big company stocks that have driven much of the recent gains — will remain a pillar of investors’ portfolios and return an annualized 6.7% over the next 10-15 years.2
The question is, should you pay much attention to any of these forecasts?
Telling the future is a dangerous game. There are far too many variables. Just try predicting what will happen in your own life over the next year, let alone the entire US economy and market. That’s why it’s been said, “The function of economic forecasting is to make astrology look respectable.”
I believe it’s easier to forecast investor behavior than it is investment behavior.
Only time will tell which one of those banks is the closest to getting it right.
The past nearly 100 years—in all its medical and technological breakthroughs and all its ugliness—have told a different story. US Stocks have averaged an annualized return of 9.9%.3
Time in the market has usually been far more profitable for the average investor than timing based on individual intuitions or institutional Wall Street forecasts.
Past performance is no guarantee of future results. Neither are the projections of currently elite banks.
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Sources:
- “Decade of Big S&P 500 Gains Is Over, Goldman Strategists Say”, Sagarika Jaisinghani, October 21, 2024. Accessed online: https://www.bloomberg.com/news/articles/2024-10-21/s-p-500-s-decade-of-big-gains-is-over-goldman-strategists-say
- “JPMorgan, at Odds With Goldman, Sees Solid Run Ahead for Stocks”, Alexandra Semenova and Isabelle Lee, October 22, 2024. Accessed online: https://www.bloomberg.com/news/articles/2024-10-22/jpmorgan-at-odds-with-goldman-sees-solid-run-ahead-for-stocks?srnd=homepage-americas
- “S&P 500 Average Return and Historical Performance”, Investopedia, January 3, 2024. Accessed online: https://www.investopedia.com/ask/answers/042415/what-average-annual-return-sp-500.asp