Wall Street strategists differ on US stock market growth, with forecasts ranging from 3 to 6.7% annually
Strategists at two of Wall Street’s largest banks have different views on the future of the US stock market, as BNN Bloomberg reports.
Goldman Sachs Group Inc. strategists forecast a modest 3 percent annual return for stocks in the coming years. This conservative outlook is driven by high starting valuations for stocks and elevated Treasury yields, which may attract more investment into bonds and other asset classes.
On the other hand, JPMorgan Chase & Co.'s asset and wealth-management analysts are more optimistic, expecting US large-cap equities to deliver an annualized return of 6.7 percent over the next 10 to 15 years.
While JPMorgan acknowledges that stock valuations are stretched and will likely contract, they believe strong macroeconomic and corporate fundamentals will offset these declines.
Monica Issar, global head of multi-asset and portfolio solutions at JPMorgan Wealth Management, stated, “Multiple contraction will be offset with healthier macro and corporate fundamentals over the next 10 years, and that foundation is a sturdier point in time for investors to allocate capital.”
Despite this positive outlook, JPMorgan’s projection for the S&P 500 still falls short of the long-term average annualized return of 11 percent since 1957.
The contrasting predictions from these two major banks highlight the broader uncertainty on Wall Street, particularly after the Federal Reserve's recent shift towards a more accommodative monetary policy.
The S&P 500 has already surged 22 percent this year and is up more than 60 percent since its October 2022 low, driven by a resilient economy, strong corporate earnings, and optimism about artificial intelligence (AI) innovations.
Goldman Sachs, however, warns of potential risks. The bank suggests there is a 72 percent chance that stocks will underperform bonds and a one-third chance that equities will lag inflation through 2034.
In contrast, JPMorgan expects stocks to outperform cash and deliver solid post-inflation returns by 2025, according to its capital markets outlook report.
Part of JPMorgan's optimism stems from the expected long-term benefits of AI, which the bank predicts will drive revenue growth and increase profit margins for large companies investing heavily in the technology.
David Kelly, chief global strategist at JPMorgan Asset Management, reinforced this confidence in JPMorgan’s projections. He acknowledged the potential for unforeseen disruptions, but said, “I am very conscious of higher valuations, I feel more confident in our numbers than theirs over the next decade.”
Kelly attributed the poor stock performance during the early 2000s to the global financial crisis but remains optimistic about future returns. He added, “American corporations are extreme — they’ve got sharp elbows, and they are very good at growing margins.”
While Goldman Sachs declined to comment further, their more cautious outlook underscores the uncertainty that continues to shape market forecasts, especially as global trade and monetary policy evolve.
