Taylor Swift! Just when you thought the world finally had enough of her, she comes roaring back with a brand-new bodysuit.
At this point, you’re either annoyed that people are talking about a one-legged unitard, or you’re the one being annoying. We’re now 41.714 fortnights into the Eras Tour — that’s one year and seven months for those of you who can’t do math — and attendance is stronger than ever.
The billionaire’s superlatives are starting to get absurd: Who else can claim to be the most-streamed artist in a single day on Spotify, plus hold the record for the most vinyl sales in a week, plus have the highest-grossing tour — and concert film — in American history?
Whenever you think she’s peaked, she beats her own personal record. Which, conveniently, brings me to the S&P 500.
Perhaps the only entity that can defy expectations as handily as Swift is the economy itself.
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Bloomberg journalist John Authers says the S&P 500 has managed to prove even the bulls wrong again and again and again.
The basket of stocks is up 23% for the year and analysts keep raising estimates, only for the index to outpace them. Goldman Sachs strategists are now predicting it will top 6,000 a year from now, which would give it an 11% increase in 2025:
Sounds marvellous, right? Reader, if only it were that easy.
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Believe it or not, these headlines came out less than a month apart. The same Goldman strategists saying the S&P 500 is set for another gangbuster year are saying the index will gain only 3% in nominal terms (1% in real terms) per year over the next decade — a historic low. That compares with 13% in the last decade, and a long-term average of 11%.
They also see a roughly 72% chance that the benchmark index will trail Treasury bonds, and a 33% likelihood they’ll lag inflation through 2034. “Investors should be prepared for equity returns during the next decade that are toward the lower end of their typical performance distribution,” the team wrote in a note dated Oct 18.
US equities have rallied following the global financial crisis, first driven by near-zero interest rates and later by bets on resilient economic growth. The S&P 500 is on track to outperform the rest of the world in eight of the last 10 years, according to data compiled by Bloomberg.
Still, this year’s 23% bounce has been concentrated in a handful of the biggest technology stocks. The Goldman strategists said they expect returns to broaden out and the equal-weighted S&P 500 to outperform the market cap-weighted benchmark in the next decade. Even if the rally were to remain concentrated, the S&P 500 would post below-average returns of about 7%, they said.
“To predict simultaneously that an already strong market will have a great next 12 months and a poor next 10 years does imply an untenable spot, or even, conceivably, a bubble,” Authers warns. Who knows how soon it might pop.
Chart: Bloomberg
