Is the US stock market heading for a fallow decade? This might be the case according to predictions made by Goldman Sachs. While the financial giant foresees the continuation of the buoyant market into the forthcoming year, it appears that the positive forecast ends there.
A barren spell could be on the horizon, with the S&P500 expected to yield a mere 3 per cent in annual returns over the coming ten-year period.
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What’s the reason? Firstly, there’s the issue of valuation. In the past decade, the index has produced substantial 13 per cent annual returns, leading to a critically high valuation. Secondly, the US market landscape is shaped by a handful of heavyweight tech firms such as Apple and Nvidia, causing an unprecedented concentration in the country’s stock market.
Goldman suggests that when the market is controlled by a small number of large corporations, this should be mirrored in the stocks’ prices, which should denote the increased risk and volatility via a lower valuation.
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While some market commentators might view this forecast by Goldman as overly negative, it is worth remembering that, with a record run of over 16 years, US stocks have been outshining others. For investors comfortable from the dazzling returns, the upcoming decade might prove a tough act to follow.