Over the past couple of weeks, analysts at a number of different Wall Street shops — including, most notably, Goldman Sachs Group — have warned that investors should brace for subpar stock-market returns over the next decade.
Investors have reason to be cautious, given that stocks’ gains over the past 10 years have left valuations at among their richest levels in history. In the past, high valuations haven’t acted as an impediment to returns over the near term — but they tend to exert a much stronger influence over the long term.
Enter a team of analysts at Bank of America Global Research, who said in a report shared with MarketWatch on Monday that the S&P 500’s annual price returns over the next decade could be as low as 1%, although this figure notably excludes dividends.
However, the index’s equal-weighted sibling could be poised for total returns of 8% a year or greater, assuming companies continue to raise their dividends. If dividends are excluded, returns on price alone should be in the ballpark of 4% to 5%.