Core Insights - Goldman Sachs released a report titled "2025-2035 Global Stock Market Decadal Outlook," emphasizing a shift from the previous decade's "U.S. stock dominance" trend and providing a warning on future asset pricing [1] Group 1: U.S. Market Outlook - The S&P 500 index achieved an annualized return of 15% over the past decade, a rare "long bull" period, but a regression to the mean is expected [2] - Goldman Sachs predicts the annualized nominal total return for the S&P 500 will decline to 6.5% over the next decade, indicating a need for investors to lower their expectations for U.S. equity beta returns [2] Group 2: Return Attribution Analysis - The expected return is broken down into three core variables: - Earnings growth is projected to contribute positively with a compound annual growth rate of approximately 6% [3] - Dividend contributions are expected to be around 1.4% [4] - Valuation adjustments are anticipated to be the largest variable, with a forecasted annual negative impact of about 1% on total returns due to a gradual contraction in the forward P/E ratio, currently at approximately 23 times [4] Group 3: Global Market Opportunities - As U.S. market returns are expected to decline, relative value in global assets is becoming apparent, with a forecasted annual return of approximately 7.7% for global equities (MSCI ACWI), surpassing U.S. equities [5] - Non-U.S. markets, both developed and emerging, are expected to outperform U.S. stocks due to structural advantages and more attractive valuations [5] Group 4: Emerging Markets and Asia - Emerging markets are projected to have the highest expected returns, driven by an average earnings growth of 9% and lower valuation starting points [6] - Total annualized returns for emerging markets are estimated at 10.9%, with Asia (excluding Japan) at 10.3% [7] - Specific high-growth segments include India leading with a 13% expected return, followed by China at 10.4%, and Korea/Taiwan at 10% [8] Group 5: Developed Markets - Developed markets like Europe and Japan are also expected to outperform U.S. stocks due to structural advantages [9] - Japan's annualized return is projected at 8.2%, driven by ongoing corporate governance reforms and shareholder return enhancements [10] - Europe is expected to have an annualized return of 7.5% in USD terms, supported by high dividends and share buybacks, with 60% of European companies' revenues coming from outside Europe [10] Group 6: Currency Factors - If the U.S. dollar enters a long-term depreciation phase, non-U.S. assets could benefit from additional currency gains, with an estimated annual contribution ranging from 0.6% to 3.5% [11] Conclusion - The report serves as a correction to expectations rather than a bearish outlook on U.S. stocks, suggesting a shift from a concentrated U.S. equity strategy to a more balanced global allocation [12] - It emphasizes the importance of maintaining focus on U.S. earnings resilience while increasing exposure to emerging markets and non-U.S. developed markets to capture valuation recovery and currency fluctuations [12]