Goldman's 10 Year Outlook

November 13, 2025

The head of equity strategy at Goldman Sachs Research (my alma mater) released an interesting (and brave!) report yesterday.   They gave their market forecast for the next 10 years!  On the surface, I know that sounds ridiculous.  But they wanted to address the question that everyone is wrestling with: are we in a bubble?

Their answer is “no, but…”

First, let’s step back.  Over the past 10 years (2016-2025), the S&P 500 returned 14.5% per year.  That’s well above the long-term market average of 7-10%.  So what drove that?  In a word: tech.  The tech-heavy Nasdaq 100 grew 22.0% per year.  

And even more insane, look at the “Mag 7” – Microsoft, Apple, Nvidia, Amazon, Google, Tesla, and Meta (aka, Facebook).   This group of “Mag 7” stocks grew 45% per year!!  Now there’s something you don’t see every day.   The largest contribution came from Nvidia and the birth of AI.  If you remove Nvidia, the Mag 7 annual return falls to 28% annually.  Still very impressive, but much less eye popping for sure.  

In case you had any doubt, we are in the midst of one of the greatest bull markets of all time.

So…  where do we go from here?  Getting back to the Goldman report.  The big brains at Goldman Sachs expect US stock returns of 6.5% per year over the next 10 years.  

Wait… Only 6.5%?  Why so low?

Stock market returns are a combination of only three things:  

(1) earnings growth,

(2) dividend yield, and

(3) valuation.  

So translate that into numbers:

(1) GS expects earnings to grow inline with long-term history – roughly 6%.  

(2) The dividend yield should remain constant at 1-2%.  

(3) And last, they expect a very small reduction in valuations (-1%).  

So add them up:  6% earnings growth, 2% div yield, and -1% valuation growth. You get to roughly 6-7% average annual returns per year.

That is just an educated guess to be sure.  That forecast is meant only as a discussion topic of how to think about the market going forward for institutional investors.  

Most importantly, GS does not see the market as overvalued.   See the chart below for their math calculated over time.   Yes, P/E multiples are higher than the historical average.  But P/E multiples are driven by interest rates.  And interest rates have steadily fallen over the past 40 years.  

If you are a finance theory nerd, this report is fascinating.  And this summary above is only the punchline to the story: most investors should see the last 10 years as more an aberration than a new normal in terms of annual stock returns.