Goldman Sachs anticipates strong long-term returns from global equities, even with current high valuations. According to a new strategy paper, the firm projects an annual return of 7.7 per cent in US dollars. This forecast aligns closely with historical medians, supported by nominal growth, profitability, and shareholder distributions, according to a team led by Peter Oppenheimer.
Developed markets, including Australia, Hong Kong, Singapore and Japan, are expected to achieve earnings growth of 6-7 per cent, consistent with historical averages. Oppenheimer’s team said that its positive outlook hinges on earnings growth as the main driver of performance. They anticipate global earnings, inclusive of buybacks, to compound at roughly 6 per cent annually. Dividends will contribute the remainder of the return, with valuations expected to slightly decrease from present highs.
Regional forecasts indicate some variation. The United States is projected to grow by 6.5 per cent, driven by earnings and dividends. Europe is expected to grow by 7.1 per cent, split evenly between earnings and shareholder returns. Japan is forecast to grow by 8.2 per cent, supported by earnings-per-share growth and policy improvements in payouts.
Asia ex-Japan is anticipated to grow by 10.3 per cent, boosted by approximately 9 per cent EPS growth and a 2.7 per cent dividend yield, which is partially offset by valuation adjustments. Emerging Markets are expected to lead with 10.9 per cent growth, driven by strong EPS growth in China and India.
