The S&P 500’s 13% annualized return over the past decade may be coming to an end as three structural headwinds emerge. First, cheap money is not returning: the 10-year Treasury yield near 4.5% and a higher neutral interest rate will raise corporate borrowing costs, squeezing the cash available for buybacks and dividends. Second, heavier capital expenditure requirements, especially for AI infrastructure, mean each dollar of revenue now demands more investment, likely reducing per-share growth. Third, U.S. stocks are priced for perfection with a Shiller price-to-earnings ratio of 40, a level exceeded only once in 140 years, prompting Goldman Sachs to forecast a 3% annualized nominal return over the next decade. While broad S&P 500 index funds remain a core tool, investors should temper their expectations.
Goldman Sachs Group IncGoldman Sachs forecasts 3% annualized S&P 500 return over next decade, implying lower investment banking and asset management revenues.
NVIDIA Corporation