Goldman Sachs unveils stock market forecast through 2035

Core Viewpoint - Goldman Sachs has revised its long-term stock market forecast, predicting a significant slowdown in returns for the next decade, with a forecast of only 6.5% annual return for the S&P 500, contrasting sharply with the double-digit returns of the past decade [1][4] Group 1: Market Predictions - The firm anticipates global stocks will yield an annual return of 7.7% through 2035, primarily driven by earnings growth rather than valuation expansion [3] - The forecast for the S&P 500 includes a steady 6% earnings growth, a mild valuation headwind, and a modest dividend yield, indicating a shift towards a more "normal" market environment [4][2] Group 2: Valuation Insights - Goldman Sachs believes current price-to-earnings (P/E) levels are unsustainable, predicting a fair-value P/E ratio of 21x by 2035, down from the current 23x [5] - The firm highlights that profit margins are near record highs and unlikely to see the same structural tailwinds that previously boosted them, such as global supply chain efficiencies and declining interest and tax expenses [6] Group 3: Investment Strategy - The emphasis will be on earnings growth rather than multiple expansion, suggesting that investors should focus on businesses that consistently grow and deliver real results rather than chasing market euphoria [4][2] - Goldman embeds a 4.5% yield for 10-year Treasuries into its framework, indicating limited room for valuation growth in the coming decade [7]