Yardeni Research, a long-term bull on Wall Street, cautions investors to be wary of concerns about the market, stating that the coming years will be a period of prosperity, with US stocks even entering the "roaring 2030s". In contrast to Goldman Sachs' forecast of a 3% increase, there is a greater likelihood of the S&P 500 rising by 11% annually in the future
After hitting multiple record highs this year, the US stock market is feared to face a "lost decade" as the view spreads on Wall Street, warning investors to prepare for a cooling market in the future.
In recent days, a report from Goldman Sachs has further fueled this sentiment. Goldman Sachs believes that the S&P 500's future ten-year return will be only 3%. This would be one of the worst periods for the stock market performance in the past century.
However, this view has faced opposition from various parties. Following JPMorgan Chase, a long-time bull on Wall Street, Yardeni Research's strategist has also come out to contradict Goldman Sachs.
On October 22nd, Ed Yardeni, a strategist at Yardeni Research, stated that investors should be cautious about these market concerns, as the next few years will be a period of market prosperity.
Yardeni: "Roaring 2030s" Ahead, S&P 500 More Likely to Rise 11% Annually
Yardeni reiterated the institution's optimistic view of the "Roaring 2020s" for the US stock market and refuted Goldman Sachs' pessimistic forecast.
He believes that the productivity gains brought about by technological progress will drive corporate profit margins and economic growth, while controlling inflation levels. The "Roaring 2020s" for the US stock market may not only continue but also extend into the "Roaring 2030s".
In Yardeni's view, Goldman Sachs' prediction of a 3% return rate for the S&P 500 index is absurd, and even their most optimistic forecast of a 7% annual return rate is not enough. He believes that with dividend payments factored in, the S&P 500 index is more likely to rise by 11% annually.
Considering that the S&P 500 index may almost achieve Goldman Sachs' target solely through the compounding effect of dividends, Yardeni finds it hard to agree that the future performance of the US stock market will be so low.
Previously, Goldman Sachs analysts stated that they expect the S&P 500 index's annualized nominal total return rate for the next ten years to be slightly above 3%. For comparison, this figure was 13% over the past decade, with a long-term average of 11%. They also believe that by the end of 2034, there is about a 72% probability that the S&P 500 return rate will lag behind US bonds, and a 33% probability that it will lag behind inflation.
Yardeni also refuted Goldman Sachs' forecast of corporate profit growth, deeming it too conservative, as corporate profits have historically grown at a compounded rate of 6.5% over the past century. Furthermore, stock markets usually rise with inflation, and future price increases by companies will further drive profit growth.
Addressing Goldman Sachs' concerns about the market being "too concentrated" and a repeat of the "dot-com bubble," Yardeni acknowledged that the technology and communication services sectors do have a higher proportion in the total market value of the S&P 500. However, unlike during the dot-com bubble period, these companies now have much more solid fundamentalsCombining the outlook for economic growth and the expected expansion of profit margins, there is still room for the market valuation to rise.
J.P. Morgan Bullish on U.S. Stocks for the Next Decade, While the World's Largest Sovereign Fund Advises Caution
As the most mainstream investment bank on Wall Street, J.P. Morgan has also put forward a contrasting view to Goldman Sachs. The bank's report states that the expected annual return of a traditional "60/40 stock-bond investment portfolio" in USD over the next 10 to 15 years is projected to be 6.4%, slightly lower than last year but still above the long-term average.
J.P. Morgan believes that this is mainly due to improvements in long-term growth prospects driven by strong capital investment, advancements in artificial intelligence and automation, and the proactive fiscal policy. At the same time, U.S. companies, especially large corporations, are "very good at increasing profit margins."
However, when it comes to the future direction of U.S. stocks, there are still two different voices on Wall Street. Apart from Goldman Sachs, the world's largest sovereign fund has also issued a warning, stating that "it's time to be a bit cautious".
Trond Grande, Deputy CEO of Norway's Bank Investment Management (NBIM), said, "Our initial allocation was 70% stocks and 30% bonds, and we usually hold this allocation under any market conditions. But now it's time to be a bit more cautious."
He believes that rising uncertainty and a "completely different geopolitical situation" mean that global stock markets are facing increasing risks at present