Goldman Sees S&P Gaining Just 6.5% Annually for Decade Ahead—Here’s How to Do Better

Core Viewpoint - Goldman Sachs predicts the stock market will deliver 6.5% annualized returns through 2035, indicating a potential slowdown compared to historical averages [1][6]. Valuations and Market Performance - Elevated valuations are expected to be the primary drag on prospective returns, with current valuations at the high end historically [2]. - The performance of the broad market, excluding the "Magnificent Seven" tech stocks, highlights the significant contribution of AI and tech giants to recent gains [2]. Future of AI Investments - There is speculation that the "Magnificent Seven" may need to pause as investors reassess the premium valuations for AI exposure, which may not yield immediate returns [3]. - The impact of current AI expenditures on future returns remains uncertain, with expectations of gradual payoffs over the next several years [3]. Alternative Investment Strategies - For investors seeking better returns than the S&P 500, Goldman Sachs suggests considering international stocks, which currently have lower valuations and potentially higher returns [5]. - The Schwab Fundamental International Equity ETF has significantly outperformed the S&P 500, gaining over 35% year to date, indicating a trend that may continue [5][6]. - Berkshire Hathaway, under CEO Greg Abel, is also projected to potentially outperform the S&P 500 over the next decade [6].