Goldman Sachs warns: S&P 500 returns could taper off

A recent analysis released by Goldman Sachs is causing a stir in the financial world: the average annual return of the S&P 500, which was a remarkable 13% over the past decade, could drop to just 3% in the coming decade. This estimate is significantly below the forecasts of Wall Street analysts, who expect a performance between 4.4% and 7.4%, with an average of 6%. Goldman Sachs attributes this skeptical forecast to the strong market concentration in the S&P 500. Currently, the ten largest stocks in the index account for more than 36% of the entire index. These impressive figures result from extraordinary profit growth over the past two years, with the so-called "Magnificent Seven" in particular having at least doubled their profits in the first quarter of fiscal year 2024. Nevertheless, analysts emphasize that history shows it is extremely difficult for companies to maintain high growth rates in revenue and profit over a decade. Indeed, the revenue growth of the "Magnificent Seven" has already lost momentum after two years of rapid development. Fortunately, experts predict double-digit profit growth for the remaining 493 stocks in the index over the next five quarters. Sylvia Jablonski, CEO and CIO of Defiance ETFs, expressed optimism about the current earnings season in an interview with CNBC. About 14% of companies in the S&P 500 have reported their quarterly figures, and 79% of them have exceeded expectations. Jablonski emphasized that despite high valuations, the strong earnings and growing profits of the companies justify them. She noted that while the "Magnificent Seven" have dominated market development over the past ten years, broader market growth is expected, driven by the smaller stocks in the index. Artificial intelligence could play a decisive role as a future growth factor, especially in the utilities and energy sectors, which are already experiencing triple-digit growth.