Goldman Sachs now forecasts 7% annualized S&P 500 returns over the next decade, more than double the 3% its previous strategist projected in 2024. The bank's Ben Snider argues high valuations can persist because low interest rates and strong corporate profits are unlikely to revert to their long-term averages.
Goldman Sachs has walked back its warning of a lost decade for U.S. stocks. Ben Snider, who took over as the bank's chief US equity strategist in January, told Business Insider in a June 29 interview that Goldman forecasts 7% annualized returns for the S&P 500 over the next decade. That is more than double what the bank projected just a couple of years earlier.
From 3% to 7%
The shift reverses a call that drew attention in October 2024. David Kostin, then Goldman's chief US equity strategist, forecast the S&P 500 would return an average of just 3% a year over the following decade. Kostin joined a group of Wall Street strategists warning that a high cyclically-adjusted price-to-earnings ratio pointed to a decade of weak returns.
The math behind that bearish case still holds. When Kostin made his call, the CAPE ratio stood at 38 times earnings, implying low-single-digit annualized returns. Today the S&P 500's CAPE ratio sits at 40, which puts implied returns right around 0%.
Why Snider sees high multiples holding
Snider's more upbeat view rests on the argument that equity valuations can stay elevated. He points to the two factors that most drive valuation multiples: interest rates and corporate profits. Investors should not expect those multiples to decline to their long-term averages, Snider told Business Insider.
Both drivers sit far from their historical norms. S&P 500 profit margins are around 13% today against about 5.5% in 1980, while interest rates, though higher since 2022, remain well below their long-term averages. Snider sees little reason for either trend to reverse soon.
Still below the historical average
The favorable backdrop cuts both ways. Snider said profit growth and interest rates are unlikely to mean-revert, but they will also struggle to keep their recent pace, which is why his 7% figure sits below the S&P 500's long-term average of around 10% going back to the 1950s.
Other firms remain in the bearish camp. Richard Bernstein, founder of Richard Bernstein Advisors, recently pointed back to the 2000-2009 period when the index delivered negative returns, and Apollo chief economist Torsten Sløk has flagged a possible decade of flat returns for the benchmark.
Source: Business Insider
Trading involves risk.
Risk Disclaimer
