S&P 500 - PŘÍJDE ZTRACENÁ DEKÁDA

Summary

Goldman Sachs strategists predict that the era of high returns in stock markets may be over, with expected returns of just 3% annually for the S&P 500 over the next decade, and only 1% after inflation. The study cites high valuations, market concentration in a few tech giants, and the attractiveness of bonds as contributing factors. However, historical pessimistic forecasts from Goldman Sachs have often proven too conservative. The video offers practical advice for investors, such as diversification and dollar-cost averaging, to navigate potentially tough times ahead.

Takeaways

• 😀 Goldman Sachs predicts that the era of high returns on stock markets, particularly the S&P 500, is over. They forecast a return of only 3% annually over the next decade, with inflation-adjusted returns closer to 1%.
• 😀 Historical precedents suggest that prolonged periods of low stock market returns, like the 2000-2009 dot-com bust and financial crisis, can occur. However, these periods are not guaranteed to repeat.
• 😀 The S&P 500's impressive return over the past decade has largely been driven by increased price-to-earnings (P/E) multiples rather than significant growth in earnings.
• 😀 Current S&P 500 valuation is high, with the index trading at around 29 times earnings, compared to a historical average of around 20. This suggests future returns may be lower, though this does not account for all factors influencing stock prices.
• 😀 The CAPE (Cyclically Adjusted Price to Earnings) ratio, used in the study, indicates that current valuations are higher than historical averages. However, the study's conclusion that this leads to lower future returns is debated, as growth factors and business models have evolved.
• 😀 The argument that the S&P 500 is overpriced due to its high valuation is not entirely convincing, as many companies in the index have strong growth prospects and competitive advantages that may justify their higher multiples.
• 😀 The market is heavily concentrated in a few large technology companies, which represent a disproportionate share of the S&P 500. This concentration might present risks, as it's historically challenging for firms to maintain rapid growth at such scale.
• 😀 Despite concerns over concentration, many of the largest companies in the S&P 500, like Microsoft, Amazon, and Apple, continue to show strong growth in profits, suggesting that their dominance might sustain performance.
• 😀 The study's claim that bond yields (around 4% for 10-year U.S. treasuries) make stocks less attractive doesn't fully account for the fact that the market has already priced in these expectations of higher interest rates.
• 😀 Goldman Sachs has previously predicted lower returns, such as in 2012 and 2020, but the actual performance of the S&P 500 has exceeded their forecasts in both cases, indicating that their current predictions may again be overly pessimistic.
• 😀 To prepare for possible periods of low or sideways stock market performance, investors should consider diversification and dollar-cost averaging, which can smooth out the impact of volatile markets and help mitigate risks.

Q & A

What is the main concern raised by Goldman Sachs regarding stock market returns?

Goldman Sachs suggests that the era of high returns in the stock market, particularly for the S&P 500 index, is over. They predict that returns over the next decade will be much lower, potentially averaging 3% annually after inflation, which would represent a 'lost decade' for investors.

What does the term 'lost decade' refer to in the context of the stock market?

A 'lost decade' refers to a prolonged period when the stock market does not generate significant gains. Historically, this has happened in the past, such as during the dot-com bubble burst and the financial crisis, where the S&P 500 had very poor returns.

How does the current valuation of the S&P 500 compare to historical averages?

The current valuation of the S&P 500 is relatively high. The index is trading at a 29x price-to-earnings (P/E) ratio, compared to the historical average of around 20x. This suggests that the index is more expensive than usual, which could lead to lower future returns.

What is the CAPE ratio, and why is it important?

The CAPE ratio, or cyclically adjusted price-to-earnings ratio, is a valuation metric that uses the average earnings of the last 10 years, adjusted for inflation. It smooths out the impact of economic cycles and provides a more accurate picture of long-term market valuation, which is currently above historical averages.

Why does the author suggest that using the PE ratio alone might be misleading?

The author argues that the PE ratio does not account for factors such as the quality of business models, the competitive advantages of companies, or potential future growth. For example, many companies today operate subscription-based models that generate steady cash flow, unlike businesses in the past.

What are some reasons that might justify a higher valuation for the S&P 500 despite high P/E ratios?

Several factors could justify the high valuation, including better access to investments, improved business models (e.g., subscription-based services), and increased competitive advantages of companies in the S&P 500, which lead to higher profit margins and sustained growth.

How does the concentration of the S&P 500 index impact future returns?

The S&P 500 is increasingly concentrated, with the top 10 companies making up a significant portion of the index. While this has led to high returns in recent years, it also poses a risk because it's difficult for companies to maintain high growth rates over time, especially as they become larger.

Why is the performance of large tech companies important to the S&P 500?

Large tech companies such as Microsoft, Amazon, Google, and Apple have been major drivers of the S&P 500's performance. These companies are reinvesting profits into new products and innovations, leading to continued growth and helping to sustain the overall performance of the index.

What role do interest rates play in the outlook for S&P 500 returns?

Rising interest rates, such as the 4% yields on 10-year U.S. Treasury bonds, make stocks less attractive by offering a safer alternative for investors. However, the market has already factored these higher rates into the current prices, meaning they may not have a significant effect on future returns.

What does the author think about Goldman Sachs' pessimistic projections?

The author is skeptical of Goldman Sachs' pessimistic projections, citing that in the past, Goldman Sachs' forecasts have often been too low. For example, their 2012 and 2020 reports underestimated the S&P 500's actual performance, which exceeded expectations.

What strategy does the author recommend for preparing for a potential 'lost decade' in the stock market?

The author suggests diversification as a key strategy for mitigating the risk of a poor decade for the S&P 500. This could include investing in other asset classes, such as small and mid-sized companies or emerging markets, which may perform better. Additionally, regular investing through dollar-cost averaging could help smooth out market fluctuations over time.

How does dollar-cost averaging help investors during periods of market stagnation?

Dollar-cost averaging involves investing a fixed amount of money regularly, regardless of the market's performance. This strategy helps investors buy more shares when prices are low and fewer when prices are high, which can reduce the impact of market downturns and lower the average cost per share over time.