Goldman Sachs (GS) has warned that the next decade for the S&P 500 (SPX) won’t be as rosy as the previous 10 years. Strategists at the bank led by Peter Oppenheimer expect the benchmark index to return 6.5% annually over the next decade, trailing Europe at 7.1%, Japan at 8.2%, Asia ex-Japan at 10.3%, and emerging markets at 10.9%.
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“We expect higher nominal GDP growth and structural reforms to favor EM, while AI’s long-term benefits should be broad-based rather than confined to US technology,” wrote the strategists in a note.
Global Rivals to Outpace S&P 500, Says Goldman
The strategists added that the S&P 500’s net profit margin and return on equity (ROE) are near record highs, and the tailwinds that support these measures may not be as strong in the future. The index is also trading at an elevated forward price-to-earnings (P/E) ratio of 23x, well above its 20-year average of 16x.
Furthermore, the underperformance of U.S. equities may have already begun. The S&P 500 is up by 16% this year compared to the MSCI World ex USA Index at 27%.
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