Goldman Sachs: The era of the S&P 500's ten-year bull run is over, with a 72% probability of underperforming US bonds in the next decade

Goldman Sachs believes that as investors turn to other assets, including US Treasuries, in search of better returns, US stocks are unlikely to maintain their performance above the average level of the past decade.

In a research report released last week, Goldman Sachs strategists including David Kostin stated that they expect the S&P 500 index's annual nominal total return rate over the next ten years to be slightly above 3%. In 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 will lag behind US Treasuries, and a 33% probability that it will lag behind inflation. Goldman Sachs wrote:

The future ten-year return of US stocks is likely to be close to the lower end of its typical performance distribution, and investors should be prepared for this.

US stocks have been on a rise since the global financial crisis, mainly benefiting from central bank low interest rates and government massive stimulus policies. As the Federal Reserve restarts its rate-cutting cycle, according to data compiled by Bloomberg, the S&P 500 index still has the potential to outperform other regions globally this year, leading for the eighth year in the past decade.

However, it is worth noting that this year's 23% rebound in US stocks is mainly concentrated in a few large tech stocks. Goldman Sachs strategists stated that they expect the return rate over the next ten years to be more diversified, and the equal-weighted S&P 500 index will outperform the market-cap-weighted performance of the index.

Even if the momentum remains concentrated, Goldman Sachs still believes that the return rate of the S&P 500 index over the next ten years will be below average, at around 7%.