The two major mainstream investment banks have given two different conclusions on the future direction of the US stock market for the next ten years. JPMorgan Chase believes that the US large-cap stocks that have been driving most of the recent gains will continue to be the cornerstone of the investment portfolio, achieving an annualized return of 6.7% over the next 10 to 15 years, with artificial intelligence playing an important role in improving productivity and economic growth. The analysis indicates that uncertainty is pervasive on Wall Street
As the most mainstream investment bank on Wall Street, JPMorgan Chase and Goldman Sachs have provided contrasting views on the long-term prospects of the U.S. stock market over the next ten years.
The differing conclusions lie in the fact that JPMorgan Chase believes that U.S. companies, especially large corporations, are "very good at increasing profit margins," coupled with advancements in technology and AI, as well as the "boost" from steady growth in developed economies.
J.P. Morgan Asset Management, with assets under management totaling $3.5 trillion, recently released the annual report "2025 Long-Term Capital Market Assumptions (LTCMA)," offering a more optimistic outlook.
The report emphasizes the solid foundation of the traditional 60/40 stock-bond allocation in investment portfolios, while also highlighting opportunities to enhance returns through active management and alternative investments, suggesting that the U.S. stock market will outperform cash and achieve robust returns after adjusting for inflation.
The report states that the annualized return on U.S. large-cap stocks over the next 10 to 15 years is projected to be 6.7%, much higher than Goldman Sachs' optimistic research report.
The report predicts that the annual return on a traditional "60/40 stock-bond investment portfolio" in U.S. dollars over the next 10 to 15 years is expected to be 6.4%, slightly lower than last year but still above the long-term average.
This is mainly due to improvements in long-term growth prospects driven by strong capital investment, advancements in artificial intelligence and automation, and proactive fiscal policies, which can also improve return prospects by adopting active management and including alternative assets.
In the category of equity assets, despite overvaluation causing a drag of 1.8 percentage points on returns during the investment period, the annualized return on U.S. large-cap stocks is expected to be 6.7%, only slightly lower than last year's 7%. The report states, "The high-quality characteristics of the U.S. market and the combination of various sectors (including a strong technology industry) may lead to higher prices for U.S. stocks compared to other similar stocks."
In contrast, Goldman Sachs' latest research report warns that the era of the S&P 500 index's significant gains over the past decade is ending, with the annualized nominal total return rate for the next ten years expected to be slightly above 3%, far lower than the 13% of the previous decade; by the end of 2034, there is about a 72% probability that the S&P index will lag behind U.S. bonds, with a 33% chance of underperforming inflation.
However, J.P. Morgan Asset Management's research report also acknowledges that over the next 10 to 15 years, the expected annualized return rate for global stocks in U.S. dollars is 7.1%, higher than the performance of U.S. stocks, with non-U.S. markets offering more attractive cyclical starting points and benefiting from currency appreciation. Furthermore, the expected return rate for emerging market stocks in U.S. dollars is even higher at 7.2%.
Monica Issar, Global Head of Multi-Asset and Portfolio Solutions at J.P. Morgan Wealth Management, also admitted that "the high valuations of U.S. stocks will eventually need to decline (i.e., multiple contraction), although robust economic and corporate fundamentals will offset this."
"In the next 10 years, the multiple contraction will be offset by healthier macroeconomic and corporate fundamentals, providing a more solid opportunity for investors to allocate capital."
In the fixed income asset class, the above research report believes that the expected annualized return of US mid-term government bonds in the next 10 to 15 years is 3.8%, and the expected return of long-term government bonds is 5.2%. Despite benefiting from higher yields, they will still underperform large-cap US stocks.
At the same time, the expected annualized return of US investment-grade credit is 5%. Due to higher economic growth expectations and improved creditworthiness, the spread between the yield of US risk-free treasuries and investment-grade credit will narrow. The expected return of US high-yield credit is 6.1%, with a fair value spread of 475 basis points, reflecting the drag on returns from the normalization.
In alternative assets that are expected to enhance portfolio returns:
- In the next 10 to 15 years, the expected annualized return of private equity is 9.9%, reflecting a slight increase due to a more favorable exit environment and increased growth opportunities in the technology and artificial intelligence sectors.
- Driven by attractive entry points and higher yields, the expected return of US core real estate is 8.1%, higher than last year's 7.5%, while the expected return of European core real estate is slightly lower at 7.6%.
- The expected return of global core infrastructure is 6.3%, reflecting stable returns and the core attributes of the services provided by this asset class.
- The expected return of a basket of commodities remains at 3.8%, with energy transition and geopolitical risks affecting the return prospects of these assets.
Analysis: JPMorgan's Outlook Less Optimistic Than S&P's Historical Average Annual Growth Rate Since Inception, Wall Street Shrouded in Uncertainty
Some analysts point out that JPMorgan Chase's forecast for the future ten-year return of the S&P 500 index is still lower than the long-term average annual growth rate of 11% of the benchmark index since its inception in 1957 until the end of 2023. The inconsistent predictions of Wall Street's major banks on the direction of US stocks after the Fed rate cut also indicate a broader uncertainty prevailing.
John Bilton, Global Head of Multi-Asset Strategy at J.P. Morgan Asset Management, stated:
"Our long-term capital market assumptions provide a roadmap to navigate the complexity of today's markets. This year's research underscores the value of active management and alternative asset classes in generating alpha returns and diversification.
We encourage investors to allocate to assets that can withstand inflation shocks and fiscal risks, with bonds remaining crucial for diversification."
Monica Issar mentioned earlier:
"This year's report emphasizes the importance of building goal-aligned investment portfolios that can withstand market volatility and capture growth opportunities.
With significant opportunities emerging in infrastructure and other real assets, investors can leverage these areas for stable income and inflation hedging."
David Kelly, Chief Global Strategist at J.P. Morgan Asset Management, pointed out:The global economy is entering a new era characterized by increased fiscal spending, increased capital investment, and stronger economic growth. The overall outlook remains optimistic as investment levels are rebounding and interest rates are normalizing.
Although inflation is expected to be slightly higher than pre-pandemic levels, the starting point for inflation is lower than last year's forecast, leading to a slight decrease in long-term inflation assumptions.
He also mentioned that the optimism of JPMorgan Chase's team is partly due to the expectation that artificial intelligence will bring higher corporate revenue growth and higher profit margins, especially for large companies that have invested heavily in this cutting-edge technology:
"In general, we believe that U.S. companies are extreme - they are agile in action and very good at increasing profits."
Other key conclusions of this report include:
Inflation and Interest Rates: Inflation is expected to be slightly higher than pre-COVID-19 levels over the next 10 to 15 years. Higher policy rates are expected to enhance strong bond returns, with the U.S. neutral cash rate forecast rising from 2.5% last year to 2.8%.
Opportunities in the Private Markets: There are rare opportunities in the global real estate market, with the expected core real estate returns in the U.S. soaring to 8.1%. Despite higher financing costs, private equity and venture capital are expected to benefit from increased capital spending and adoption of technology.
Optimistic Growth Forecasts: Economic growth forecasts in developed markets have been slightly revised upwards, with the U.S. expected to benefit from strong immigration and AI-driven productivity growth. Strong capital investment, technological progress, and fiscal stimulus will drive even stronger economic growth.
Impact of Artificial Intelligence: Artificial intelligence is expected to play a significant role in improving productivity and economic growth. The report predicts that AI will bring 20 basis points of growth to developed markets annually. Considering the transformative potential of this technology, this forecast may be conservative. This trend is expected to support higher corporate revenue growth and profit margins, especially for large U.S. companies