Goldman Sachs predicted earlier this month, $S&P 500 Index (.SPX.US)$ The forecast of only 3% annualized nominal total return over the next ten years has sparked intense debate on Wall Street, with many big shots refuting this viewpoint.

Goldman Sachs stated that due to a series of factors such as economic weakness, high market concentration, and soaring US Treasury yields, the S&P 500 index will see a weak performance in the next 10 years. The bank's strategist pointed out that these unfavorable factors may result in the benchmark index having a nominal annualized return rate of only 3% in the next 10 years, lower than the average annualized return rate of 13% for the Standard & Poor's 500 index over the past 10 years.

In a recent report, Goldman Sachs remains firm in its opinion and further illustrated the view that 'the golden age of the S&P 500 index is coming to an end' using four charts.

1. Only a few S&P 500 index component companies maintain sales growth.

Goldman Sachs pointed out that the proportion of companies in the S&P 500 index with high sales growth is very small.

The report stated that the bank analyzed the performance of all component companies since 1985. The results show that only 11% of companies have maintained a sales growth rate of 10% or more in the past 10 years, and only 3% of companies have maintained a sales growth rate of 20% or more in the past 10 years.

Note: The light blue line represents the proportion of companies with sales growth exceeding 10%, and the dark blue represents the proportion of companies with growth exceeding 20%.

The market concentration of the S&P 500 index is at its highest level in a century.

Goldman Sachs pointed out that the market capitalization of the largest stocks in the S&P 500 index is over 700 times the market capitalization of the 75th percentile of stocks in the index, the highest multiple in nearly 100 years, indicating a high level of concentration in the benchmark index.

The bank wrote that, except during economic recessions, an increase in market concentration usually leads to a decrease in the roi of the S&P 500 index over the next 10 years.

The performance of the S&P 500 index has been relatively poor.

Goldman Sachs also pointed out that since the beginning of this year, the total return of the S&P 500 index has lagged behind some other indices and assets, including the Russell 1000 index,$Bitcoin (BTC.CC)$And gold.

Meanwhile, the total roi of the S&P 500 index has been consistently behind the S&P 500 equal weight index (SPW) and the S&P 400 index for many years.

Goldman Sachs strategists advise: "Investors should consider allocating to other indices that we believe are poised for strong future performance. Especially the two indices mentioned above (SPW and S&P 400)."

"The long-term performance of these alternative investments reflects a fact that the strength of the US economy and the profitability and innovation ability of US companies can be demonstrated beyond large cap stocks and market cap-weighted indices," they wrote.

The S&P 500 index has risen by about 23% year-to-date. Companies' performance has been relatively strong so far this quarter. FactSet's data shows that among the companies that have reported earnings, 75% have exceeded expectations, which is in line with the 10-year average level.

However, overall, Goldman Sachs strategists indicated that they are only bullish on the short-term performance of the S&P 500 index, expecting an 8% growth in EPS by the end of 2024, and a 11% growth in EPS next year.

They predict that the benchmark index is expected to reach 6,300 points in the next 12 months, which means an additional 8% increase from the current level.

Editor/rice