Goldman Sachs believes that as investors turn to other assets, including U.S. bonds, for better returns, it is unlikely that U.S. stocks will maintain their performance above the average level of the past decade.

In the research report released last week, Goldman Sachs strategists including David Kostin stated that they expect the S&P 500 Index to have a nominal total annual return of slightly above 3% over the next decade. For comparison, this figure was 13% over the past decade, with a long-term average level of 11%.

They also believe that by the end of 2034, the S&P 500 return is likely to lag behind U.S. bonds by about 72%, with a 33% probability of lagging behind inflation. Goldman Sachs wrote:

The future return on U.S. stocks over the next decade is likely to be close to the lower end of its typical performance distribution, and investors should be prepared for this.

After the global financial crisis, U.S. stocks have risen continuously, mainly benefiting from central bank low interest rates and government large-scale stimulus policies. With the Fed restarting its rate cut cycle, according to Bloomberg's data compilation, the S&P 500 Index still has the potential to outperform other regions globally this year, leading for the eighth year in the past decade.

However, it is worth noting that this year's 23% rebound in U.S. stocks is mainly concentrated in a few large technology stocks. Goldman Sachs strategists state that they expect the return over the next decade to be in large cap diversification, and the weighted average performance of the S&P 500 index will outperform the market cap-weighted index.

Even if the upward trend remains concentrated, Goldman Sachs still believes that the return on the S&P 500 Index over the next decade will also be below average at approximately 7%.