Strategists at two of Wall Street's biggest banks have reached diverging conclusions about where the U.S. stock market is heading in the years ahead.
With the S&P 500 Index hovering near record highs, strategists at Goldman Sachs Group Inc. are warning that stocks may deliver a paltry 3% annually in the coming years — restrained by an already-high starting point and elevated Treasury yields that could siphon money off into bonds and other types of assets.
Over at JPMorgan Chase & Co.'s asset and wealth-management divisions, analysts offer a more benign outlook.
They're anticipating that U.S. large-cap equities — the big company stocks that have driven much of the recent gains — will remain a pillar of investors' portfolios and return an annualized 6.7% over the next 10-15 years.
While the rally has made prices a bit harder to justify when plotted against earnings — and the bank's strategists say valuations will eventually need to go down — they anticipate that solid fundamentals will compensate for that.
"We want to make sure that people do understand that we are assuming multiple contraction," Monica Issar, JPMorgan Wealth Management's global head of multi-asset and portfolio solutions, said at a round-table on Monday.
"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," she added.
Still, the bank's estimate for S&P 500 performance trails the long-term average of an annualized 11% since the benchmark's inception in 1957 through the end of 2023.
