Is a lost decade in store for US stocks? Goldman Sachs expects the bull market to continue next year, but that’s where the good news ends.
A lost decade may be in store, with the S&P500 projected to return annualised returns of just 3 per cent over the next 10 years.
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Why? First, valuation. The index has enjoyed annual returns of 13 per cent over the last decade, resulting in a very steep valuation. Second, the US is dominated by a few megacap technology companies like Apple and Nvidia, resulting in a stock market more concentrated than any over the last century.
When a few big companies dominate the market, stock prices should reflect the higher risk and volatility with a lesser valuation, says Goldman.
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Some analysts see Goldman’s forecast as unnecessarily pessimistic. Still, US stocks have outperformed for more than 16 years, the longest period of outperformance in history. A more challenging decade may await investors accustomed to stellar gains.
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