Where Goldman Sachs says the S&P 500 is headed next year and in the next decade

Core Viewpoint - Goldman Sachs projects the S&P 500 to reach 7,600 by the end of 2026, indicating an 11% gain from current levels [1] Group 1: Long-term Forecast - A team led by chief global equity strategist Peter Oppenheimer anticipates a 6.5% annualized return for the S&P 500 over the next 10 years, which is lower than the 7.7% forecast for global equities [2] - The forecast includes a range of bearish and bullish cases for the S&P 500, estimating returns between 3% and 10% [3] Group 2: Economic Factors - The forecast incorporates corporate revenue growth aligned with nominal GDP growth, with a potential modest boost from a weakening U.S. dollar [5] - The current net profit margin for the index is at a record high of 13%, up from 5% in 1990, attributed to global supply chain integration, declining interest rates, and lower corporate taxes [5] Group 3: Valuation Insights - Goldman's valuation forecast assumes no significant change in corporate profitability over the next decade, leading to a forward price-to-earnings multiple of 21 times for the S&P 500, a 10% decline from the current multiple of 23 times [6] - The team believes U.S. equity valuations will likely remain above long-term averages unless there is a dramatic increase in interest rates or a sharp decline in corporate profitability [7] Group 4: Market Concentration Risks - A significant uncertainty in the long-term forecast is the extreme concentration of equity among the largest U.S. companies, whose strong earnings and valuations have inflated stock multiples and returns in recent years [7]