Top analyst sees U.S. stocks underperforming the rest of the world over the next decade as 'superstar' AI stocks make forecast uncertain | Fortune

"Goldman Sachs' Peter Oppenheimer, one of the investment world's most-watched strategists, has sent a powerful message to investors: U.S. stocks are set to underperform over the next decade, and virtually every other region should return more. This forecast marks a sharp turn from the dominance American equities have shown in the last generation and is set to reshape global portfolio strategy for years to come."

"In a Global Strategy Paper dated Nov. 12, analysts on Oppenheimer's team noted current global valuations are high, with the 12-month forward price-to-earnings (P/E) multiple for the MSCI AC World index sitting around 19x. However, the U.S. market has a particularly high starting P/E of approximately 23x. The baseline forecast for the U.S. assumes a 1% annual decline in valuations over the decade, with downside risk seeing a 3% annual drop."

"In a cautionary note, the team argued "extreme current U.S. equity market concentration increases the uncertainty around the long-term" forecast. "Extraordinary earnings strength" and elevated valuations among the largest U.S. firms have helped boost the U.S. equity market in recent years, driving earnings growth and multiples, and this may continue, Goldman wrote, meaning the forecast could surprise to the upside, as equity returns have surpassed forecasts during the past decade."

U.S. stocks are projected to underperform over the next decade while virtually every other region should return more. Global valuations are high, with the 12-month forward P/E for the MSCI AC World at about 19x and the U.S. starting P/E near 23x. The baseline assumes a 1% annual decline in U.S. valuations over the decade, with downside risk implying a 3% annual drop. Extreme current U.S. equity market concentration increases uncertainty around long-term outcomes; extraordinary earnings strength and high valuations among the largest firms have driven recent returns and could persist. If profitability or valuations of the largest companies falter and no new cohort of 'superstars' emerges, broad-market returns would likely be hampered; only two historical valuation parallels exist: the dot-com bubble and briefly 2021.

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