S&P 500 to return 6%/year over next 10 years, Goldman forecasts

• Goldman Sachs strategists, led by David Kostin, forecast that the S&P 500 will generate average annual returns, including dividends, of 6% over the next 10 years.
• They also say stocks have a 90% chance of beating bonds during that time. Not surprising, seeing that the 10-year Treasury only yields 0.65%.
• Of course, there are risks to the S&P 500 outlook — deglobalization, taxes (especially given the November presidential election), labor costs, demographics, and index composition.
• The strategists incorporated five factors into their forecast — today's absolute and relative valuations, equity allocations, dividend yield estimates, and economic modeling.
• In July 2012, Goldman conducted a similar forecast and estimated return of 8%, which underestimated the actual gain of 13.6%.
• SPY performance over the past five years: