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All right, so you know how everyone's always trying to predict what's going to happen in

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the stock market.

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Always.

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Well, Goldman Sachs, they just came out with a report that's got everyone kind of buzzing.

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Yeah, what's their take?

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They're saying we should brace ourselves for some potentially, well, lower returns over

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the next decade.

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Hmm.

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Not exactly the news everyone wants to hear.

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So we're going to try to break down what they're thinking and figure out what this could actually

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mean for everyday investors like you and me.

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Sounds like a plan.

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What exactly are they predicting?

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So get this.

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They're saying we might only see like 3% annual returns.

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3%?

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3% per year until 2034.

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That's a big drop, especially when you think about the average we've seen over the past

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10 years.

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That's a huge difference.

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What was the average over the last decade?

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It was whopping 13%.

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It's a steep decline.

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Yeah, it makes you wonder.

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So naturally everyone's asking why?

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Why so gloomy Goldman Sachs?

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Well, they actually give five key reasons.

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And the first one, valuations.

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Valuations, meaning?

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Meaning they basically think the market is just too expensive right now, like a designer

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handbag that everyone wants, but it's way overpriced.

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I get the analogy, but how do they measure that, this expensiveness?

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Okay.

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So they point to this thing called, you ready for this?

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The S&P 500, cyclically adjusted PE ratio.

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The what now?

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That's a mouthful.

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I know, right.

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Break that down for me.

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What is that?

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Well, lucky for us, we've got an expert here to explain all the financial jargon.

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Happy to help.

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So at its core, a PE ratio is basically a price tag for a company's earnings.

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It tells you how much investors are willing to pay for every dollar of profit.

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Okay, that makes sense.

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But what about that cyclically adjusted part?

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Why add that on?

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Right.

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The cyclically adjusted part basically means they're taking into account all those economic

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ups and downs.

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So it's like a fancy, more accurate version of a regular PE ratio.

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I see.

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So it's like comparing apples to apples, right?

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Exactly.

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You got it.

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Now, when this ratio gets really high, it often means investors are betting on big future

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growth.

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They're basically paying a premium because they think those earnings are going to skyrocket.

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Kind of like buying a stock based on hype, hoping it'll become the next big thing.

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Kind of, yeah.

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But there's a catch.

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If those expectations don't pan out, well...

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The price could crash.

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Exactly.

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And you know what's interesting?

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Goldman Sachs points out that this ratio was at its peak right before, wait for it, the

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1930s crash.

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You're kidding.

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So it's like a historical red flag.

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It does make you think, doesn't it?

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It definitely does.

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But hold on.

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It can't just be about some historical coincidence, right?

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Right?

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There's got to be more to it.

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Oh, there's definitely more.

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JPMorgan has tons of data and it shows a clear pattern.

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When this P-E ratio starts high, the average return over the following years is usually

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lower.

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So basically chasing those super high returns could backfire in the long run.

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Exactly.

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It's a reminder that sometimes slow and steady wins the race.

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Food for thought for all those get rich quick schemes out there.

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Okay, let's say this P-E ratio is high.

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We should be cautious.

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Does that automatically mean like ditch all our stocks?

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Now, hold on, we got to remember that the market's a dynamic thing.

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History can guide us, yeah, but it doesn't dictate the future.

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You know what I mean?

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Fair enough.

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So valuations are one piece of the puzzle.

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What else is Goldman Sachs worried about?

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Their second concern is about market concentration.

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Basically they're saying a handful of huge companies like NVIDIA and the Magnificent 7

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Tech giants are having a disproportionate impact.

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It's like they're the stars of the show and everyone else is just backup dancers.

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That's a good way to put it, but what if those stars, you know, they start to fade?

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Yeah, that's what Goldman Sachs is worried about.

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They argue that these big companies can't keep growing at this crazy pace forever.

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Eventually things have got to level out and if those giants stumble, the whole market could

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take a hit.

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They even have a chart that shows this trend.

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They call it market cap dominance, which basically means the biggest companies are taking up more

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and more of the overall market.

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In those top 10 stocks, they made up a huge chunk of the S&P 500 now.

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It's getting kind of crowded at the top.

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So it's a bit like putting all your eggs in one basket, right?

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If that basket drops.

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Not good.

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But you know, we got to be careful about comparing today's market to past events like the dot

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com bubble.

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Because back then a lot of those companies had crazy valuations but weren't actually

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making much money.

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It was all hype.

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Exactly.

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But these tech giants today, they're making serious bank.

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And JP Morgan's data shows that profit margins for companies in the S&P 500 have gone way

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up since 2002.

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So it's like, are these companies just bigger and more established now or are we setting

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ourselves up for another dot com style crash?

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Tough colon.

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Yeah, no easy answers there.

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It really makes you think about whether today's market is playing by a totally different set

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of rules.

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So we've got potentially overpriced stocks and an overreliance on a few big companies.

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What else is on Goldman Sachs's list of worries?

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Well, this one might hit a little closer to home.

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They're predicting we'll see more economic contractions in the next decade.

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More contractions.

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Like recessions.

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Yeah.

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Basically periods where the U.S. economy actually shrinks.

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They're estimating maybe four contractions, which would be like 10% of all the quarters.

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Whoa.

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That's a bit unsettling.

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But isn't predicting the economy kind of like, I don't know, predicting the weather impossible

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to be 100% right?

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You're not wrong.

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Forecasting economic swings is tough, no doubt.

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But the stock market, it tends to react pretty negatively to any kind of economic contraction.

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So even if those contractions are short lived, they could still drag down the overall market

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performance.

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Makes sense.

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Historically, during those quarters with the shrinking GDP, the market averages a negative

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1% return.

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Which, not great.

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So maybe all this fear about a potential slowdown, it's already priced into the market.

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You know, that's a really good point.

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The market's always trying to anticipate what's next.

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So if everyone's expecting a contraction, it might already be reflected in those stock

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prices.

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It's like the market's a giant complex puzzle.

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We've got three pieces figured out, but there's still two more to go.

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What's next on Goldman Sachs's list?

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They're diving back into the corporate world for this one.

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They're saying we should expect lower corporate profits in the years to come.

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Lower profits?

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How does that impact the stock market?

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Well, when companies aren't making as much money, you know, investors aren't as willing

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to pay top dollar for their stock.

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So lower profits could mean lower stock prices.

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Got it.

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It makes you think about all those companies that were once considered giants, you know,

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like Nokia, Blackberry, Xerox.

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Themes we all knew.

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What happened?

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They just faded away.

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It's a good reminder that even the biggest, most successful companies can stumble.

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Predicting which ones will thrive and which ones will fizzle out.

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That's almost impossible.

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The business world is a constantly changing landscape.

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Look how much things have changed just in the past few decades with the internet and

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smartphones and everything.

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Yeah.

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Who could have predicted all that back then?

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So if it's so hard to predict the future of individual companies, how can we even try

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to predict what'll happen to the whole market?

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That's the challenge, isn't it?

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All right.

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So, when Sax is fifth and final point, what's their last argument for lower stock market

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returns?

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This one's all about alternative investments and it has to do with interest rates.

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Interest rates.

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How do those play into this?

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Well, with 10-year US Treasury yields above 4% right now, investors have another pretty

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attractive option.

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So they can lock in a safe return without all the risk and volatility of the stock market.

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Exactly.

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They're choosing between a wild roller coaster ride and a relaxing stroll in the park.

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Some people just prefer that steady, predictable path.

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And right now, savers can get a decent return without having to stomach all those market

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ups and downs.

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But what about all those gains the stock market has made in recent years?

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Didn't the S&P 500 do pretty well in 2023 and 2024?

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True.

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True.

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There's always a trade-off.

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Some folks might have missed out on those gains because they chose the safer option.

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So it's a gamble either way.

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Kind of, yeah.

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And the truth is, nobody can perfectly time the market.

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It's impossible to know exactly when to buy and sell to maximize your returns.

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So even with all their expertise, Goldman Sachs can't tell us for sure what's going

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to happen.

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Makes sense, I guess.

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But it kind of makes all this predicting seem pointless.

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Well, it reminds us that past performance doesn't guarantee future results.

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That's a good point.

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And remember that report Vanguard put out a while back, the one predicting lower stock

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market returns.

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Yeah, it made headlines.

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Well, they were way off.

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The market actually did much better than they expected.

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Proving that even the big names can get it wrong sometimes.

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Predictions are just predictions.

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Not guarantees.

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You know, it's funny.

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Those negative predictions always seem to grab more attention, don't they?

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Like those scary headlines.

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Market crash imminent.

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Oh, absolutely.

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Fear sells, right.

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A dramatic prediction gets more clicks than a boring, balanced analysis.

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But we as investors, we got to be aware of that bias.

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It's easy to get caught up in the fear and make rash decisions.

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That's why it's crucial to have a long-term perspective.

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Don't let those short-term jitters derail your whole investment strategy.

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So what does all this mean for us as we try to navigate the market in the years to come?

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I mean, if the experts can't predict the future, how are we supposed to make smart decisions?

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Well, that is the million-dollar question, isn't it?

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We can't control what the market does, but we can control how we react.

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So it's all about making informed decisions and having a plan.

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Exactly.

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All right, so let's recap those five reasons Goldman Sachs gave for their less than optimistic

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outlook, just to make sure we're all on the same page.

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Sounds good.

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So first up, we have those high valuations.

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They're worried the market might be overpriced, which could lead to lower returns down the

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road.

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Right.

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And second, there's that market concentration issue.

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A few big companies are having a huge influence, and that could be a problem if those companies

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stumble.

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Yep.

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Third, we've got the potential for more frequent economic contractions, which history tells

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us aren't exactly good news for the stock market.

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And then there's a whole declining corporate profits thing.

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Lower profits often mean lower stock prices.

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And finally, there's the appeal of alternative investments, especially with those rising

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interest rates making bonds and other fixed-income securities look more tempting.

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So they've laid out their case, but are they right?

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That's the big question.

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And unfortunately, none of us have a crystal ball.

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Makes investing a bit of a gamble then, doesn't it?

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It does.

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There's always risk and uncertainty.

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We make decisions based on the best information we have, but there are always those factors

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we can't control.

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It's like playing chess, but the rules keep changing, and your opponent is the entire

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global economy.

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That's a fantastic analogy.

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It definitely highlights how important it is to stay flexible and be ready to adapt.

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So what are the key takeaways for our listeners as they think about their own investment plans?

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Well, diversification is essential.

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Don't put all your eggs in one basket, as they say.

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Spread your investments around.

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Different asset classes, sectors, different parts of the world.

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Exactly.

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It's like having a backup generator for your portfolio.

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If one part of the market takes a hit, you've got others to help soften the blow.

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Love that analogy.

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What else?

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Remember that investing is a marathon, not a sprint.

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Focus on your long-term goals and stay disciplined.

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Resist those urges to panic sell when things dip or chase after the latest hot stock tip.

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Solid advice.

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Anything else?

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Do your own research.

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Don't just follow the crowd.

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Talk to a financial advisor if you need to.

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It's all about creating an investment strategy that works for you, for your goals, and your

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risk tolerance.

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All right.

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I think we've covered a ton of ground today.

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We've broken down Goldman Sachs' predictions, looked at the market from different angles,

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and hopefully given our listeners some food for thought.

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It's been a great discussion.

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So before we wrap up this part of our deep dive, I want to leave our listeners with one

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final thought.

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If the future is really this uncertain, what can you do today to prepare yourself for whatever

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the market throws your way?

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What strategies will help you navigate this ever-changing financial landscape?

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We'd love to hear your ideas in the comments.

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We'll be back after a short break to explore some additional perspectives and offer some

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final thoughts on navigating the uncertainties of the market.

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Welcome back to our deep dive into Goldman Sachs' predictions.

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We were just talking about how no one can perfectly time the market.

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It's impossible to know exactly when to buy and sell, right?

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Right.

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And that brings us back to the core of what we're talking about today.

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Predicting the market is always a bit of a guessing game.

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So even with all their fancy algorithms and historical data, even Goldman Sachs can't

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tell us for sure what's going to happen.

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Nope.

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And it's easy to get caught up in the headlines, you know?

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But we got to remember that past performance isn't a guarantee if future returns.

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It's like thinking you'll win the lottery just because you found a penny on the sidewalk.

308
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Exactly.

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It makes you realize that we're all in this together, trying to figure things out as we

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go.

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Speaking of getting things wrong, didn't Vanguard make some predictions a while back?

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They did.

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I think it was about 10 years ago they put out a report predicting lower stock market

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returns.

315
00:13:49,200 --> 00:13:50,200
Yeah.

316
00:13:50,200 --> 00:13:51,200
Well, they were way off.

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The market ended up doing much better than they expected.

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See?

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Even the most respected firms can miss the mark.

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It just goes to show that no one has a crystal ball.

321
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And let's be honest, those doom and gloom predictions, those always get the most attention,

322
00:14:04,520 --> 00:14:05,520
right?

323
00:14:05,520 --> 00:14:06,520
Oh, yeah, totally.

324
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Market crash imminent.

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Way more dramatic than steady growth continues.

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Fear sells.

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It's like clickbait for the financial world.

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And as investors, we have to be wary of that.

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Don't let those scary headlines make you do something you'll regret later.

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Solid advice.

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Stay calm, think long-term, and don't let emotions drive your investment decisions.

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00:14:27,040 --> 00:14:32,000
So if even the experts can't predict the future, what's the best way to approach investing

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in the coming years?

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00:14:33,520 --> 00:14:35,480
That's the question we're all trying to answer, right?

335
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We can't control the market's ups and downs, but we can control how we respond to them.

336
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So focus on what we can control.

337
00:14:42,560 --> 00:14:43,560
Got it.

338
00:14:43,560 --> 00:14:44,560
Exactly.

339
00:14:44,560 --> 00:14:46,260
Diversify your investments.

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Spread your risk across different asset classes, different sectors, even different parts of

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the world.

342
00:14:51,840 --> 00:14:53,960
Don't put all your eggs in one basket.

343
00:14:53,960 --> 00:14:54,960
Exactly.

344
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And think of investing as a long-term game.

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Don't get caught up in those day-to-day fluctuations.

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Tune out the noise.

347
00:15:00,360 --> 00:15:01,360
Exactly.

348
00:15:01,360 --> 00:15:03,600
And most importantly, do your own research.

349
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Don't just blindly follow the herd.

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Take charge of your financial future.

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Be informed, be proactive, and make decisions that feel right for you.

352
00:15:12,040 --> 00:15:13,040
Absolutely.

353
00:15:13,040 --> 00:15:15,160
And remember, investing is a journey.

354
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There will be bumps along the way, but the key is to keep learning and stay engaged.

355
00:15:19,440 --> 00:15:20,440
Well said.

356
00:15:20,440 --> 00:15:24,960
Well, I think it's time to shift gears a bit.

357
00:15:24,960 --> 00:15:27,840
You know, inject some positive energy into this conversation.

358
00:15:27,840 --> 00:15:29,000
Talk about something that's exciting.

359
00:15:29,000 --> 00:15:30,400
I like where you're going with this.

360
00:15:30,400 --> 00:15:31,400
What's just thinking?

361
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Innovation.

362
00:15:32,400 --> 00:15:33,400
Yeah.

363
00:15:33,400 --> 00:15:34,400
Now you're talking.

364
00:15:34,400 --> 00:15:35,400
That's what it's all about.

365
00:15:35,400 --> 00:15:39,800
We get so focused on analyzing the past and the present that we forget about the power

366
00:15:39,800 --> 00:15:43,120
of innovation to, like, totally shake things up.

367
00:15:43,120 --> 00:15:44,120
You're right.

368
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Throughout history, we've seen how new technologies create whole new industries and drive massive

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economic growth.

370
00:15:50,480 --> 00:15:53,280
It's like, remember those sci-fi movies we used to watch?

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Online cars, teleportation, all that stuff.

372
00:15:55,760 --> 00:15:58,040
It seemed so impossible back then.

373
00:15:58,040 --> 00:15:59,040
Yeah.

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And now look at us.

375
00:16:00,040 --> 00:16:04,000
We carry around these little computers in our pockets that can access pretty much all

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the information in the world.

377
00:16:05,360 --> 00:16:06,520
It's mind-blowing.

378
00:16:06,520 --> 00:16:11,120
And the crazy thing is the pace of innovation, it's just getting faster and faster.

379
00:16:11,120 --> 00:16:12,120
Exactly.

380
00:16:12,120 --> 00:16:15,000
Which means it's even harder to predict what the future holds.

381
00:16:15,000 --> 00:16:18,200
And that creates both opportunities and risks for investors.

382
00:16:18,200 --> 00:16:19,200
Absolutely.

383
00:16:19,200 --> 00:16:24,240
So how do we even begin to wrap our heads around investing in a future that's so unpredictable?

384
00:16:24,240 --> 00:16:27,200
Well, we can't predict the future, that's for sure.

385
00:16:27,200 --> 00:16:29,400
But we can look for emerging trends, right?

386
00:16:29,400 --> 00:16:30,400
See where things are heading.

387
00:16:30,400 --> 00:16:31,400
Like, give me an example.

388
00:16:31,400 --> 00:16:32,400
Sure.

389
00:16:32,400 --> 00:16:34,400
Take the shift towards renewable energy.

390
00:16:34,400 --> 00:16:36,520
That's a trend that's only going to grow.

391
00:16:36,520 --> 00:16:41,600
So investing in companies that are involved in solar, wind, clean energy technologies,

392
00:16:41,600 --> 00:16:42,600
that could be a good bet.

393
00:16:42,600 --> 00:16:43,600
Okay.

394
00:16:43,600 --> 00:16:44,600
I see your point.

395
00:16:44,600 --> 00:16:45,600
But let's be real.

396
00:16:45,600 --> 00:16:50,840
Does everyone have the time or the expertise to analyze emerging trends and pick individual

397
00:16:50,840 --> 00:16:51,840
stocks?

398
00:16:51,840 --> 00:16:52,840
You're right.

399
00:16:52,840 --> 00:16:55,280
Not everyone wants to be a stock-picking guru.

400
00:16:55,280 --> 00:16:56,720
So what about the rest of us?

401
00:16:56,720 --> 00:16:59,080
The ones who want a simpler approach?

402
00:16:59,080 --> 00:17:01,680
Well that's where index funds and ETFs come in.

403
00:17:01,680 --> 00:17:03,600
ETFs, those are exchange-traded funds.

404
00:17:03,600 --> 00:17:04,600
You got it.

405
00:17:04,600 --> 00:17:07,600
And with these, you're basically investing in a basket of stocks or bonds.

406
00:17:07,600 --> 00:17:11,480
So you get broad exposure to the market without having to pick and choose individual winners

407
00:17:11,480 --> 00:17:12,480
and losers.

408
00:17:12,480 --> 00:17:13,480
Smart.

409
00:17:13,480 --> 00:17:14,480
Exactly.

410
00:17:14,480 --> 00:17:18,040
That's a question for folks who want a low-cost, diversified approach.

411
00:17:18,040 --> 00:17:21,840
So we've got those high-risk, high-reward options like trying to pick the next big-tech

412
00:17:21,840 --> 00:17:27,040
company and then we've got the more diversified approach with index funds and ETFs.

413
00:17:27,040 --> 00:17:31,760
But with all this talk about risk and uncertainty, I got to ask, maybe it's just safer to stick

414
00:17:31,760 --> 00:17:33,240
our money into savings account.

415
00:17:33,240 --> 00:17:35,520
At least it's guaranteed, right?

416
00:17:35,520 --> 00:17:36,520
That's a common question.

417
00:17:36,520 --> 00:17:41,640
And it comes down to your personal circumstances, goals, and how much risk you're comfortable

418
00:17:41,640 --> 00:17:42,640
with.

419
00:17:42,640 --> 00:17:45,440
And you just don't like taking risks with your money.

420
00:17:45,440 --> 00:17:46,720
Totally understandable.

421
00:17:46,720 --> 00:17:50,400
But savings accounts, they usually offer pretty low returns.

422
00:17:50,400 --> 00:17:52,160
Especially when interest rates are low.

423
00:17:52,160 --> 00:17:53,160
Exactly.

424
00:17:53,160 --> 00:17:57,200
And over time, that low return might not even keep up with inflation.

425
00:17:57,200 --> 00:18:00,920
Meaning, your money could actually lose value over time.

426
00:18:00,920 --> 00:18:02,280
Your saving.

427
00:18:02,280 --> 00:18:04,520
But your purchasing power is shrinking.

428
00:18:04,520 --> 00:18:05,520
Exactly.

429
00:18:05,520 --> 00:18:10,040
So while the stock market has its risks, it also offers the potential for higher returns,

430
00:18:10,040 --> 00:18:13,200
which can help you grow your wealth and reach those financial goals.

431
00:18:13,200 --> 00:18:16,480
So it's all about finding that balance between risk and reward.

432
00:18:16,480 --> 00:18:17,480
Absolutely.

433
00:18:17,480 --> 00:18:20,760
It's about finding an approach that you're comfortable with, one that lets you sleep well

434
00:18:20,760 --> 00:18:21,760
at night.

435
00:18:21,760 --> 00:18:22,760
Well said.

436
00:18:22,760 --> 00:18:25,000
And I think that's a good place to wrap up this deep dive.

437
00:18:25,000 --> 00:18:26,880
Yeah, we've covered a lot of ground.

438
00:18:26,880 --> 00:18:31,520
We analyzed those Goldman Sachs predictions, looked at the market from all angles, and

439
00:18:31,520 --> 00:18:35,440
hopefully gave our listeners some things to think about as they plan their own financial

440
00:18:35,440 --> 00:18:36,440
futures.

441
00:18:36,440 --> 00:18:38,760
It's all about making informed decisions, right?

442
00:18:38,760 --> 00:18:39,760
Right.

443
00:18:39,760 --> 00:18:41,840
There's no one-size-fits-all approach.

444
00:18:41,840 --> 00:18:44,520
What works for one person might not work for another.

445
00:18:44,520 --> 00:18:49,360
So do your research, think critically, and most importantly, make choices that align

446
00:18:49,360 --> 00:18:51,640
with your goals and your risk tolerance.

447
00:18:51,640 --> 00:18:55,600
Thanks for joining us on this deep dive into the world of market predictions, innovation,

448
00:18:55,600 --> 00:18:56,600
and investing.

449
00:18:56,600 --> 00:19:12,680
We'll see you next time.