Goldman Sachs Reveals Stock Market Predictions for 2035

Goldman Sachs' Market Forecast: Goldman Sachs predicts a modest 6.5% annual return for the S&P 500 over the next decade, contrasting sharply with the double-digit returns of the past, emphasizing that earnings growth will be the primary driver rather than valuation expansion.

Valuation Concerns: The firm warns that current price-to-earnings (P/E) ratios are unsustainably high, projecting a fair-value P/E of 21x by 2035, as profit margins are near record highs and structural tailwinds are fading.

Emerging Markets as Opportunities: Goldman highlights that the best investment returns in the next decade may come from emerging markets, with expected returns of 10.9% for EM, 10.3% for Asia ex-Japan, and 8.2% for Japan, driven by stronger GDP growth and governance improvements.

Currency Impact on Returns: The firm anticipates a long-term reversal of the overvalued U.S. dollar, which could enhance returns from emerging markets by 1.7% annually, as historical trends show that dollar weakness often coincides with foreign market outperformance.