Goldman Sachs Makes The Case for A Lost Decade in US Stocks

It's going to be a long next 10 years for investors in US stocks, according to Peter Oppenheimer.

The Goldman Sachs strategist, who correctly predicted Wall Street's underperformance this year, sees US equities continuing to lag other markets for the next decade.

Oppenheimer and his team expect the S&P 500 to achieve annual returns of 6.5% in the coming 10 years, the weakest among all regions. Emerging markets are projected to be strongest, at 10.9% a year.

After a decade of constantly superior performance, driven by a surge in technology stocks and the craze for artificial intelligence, the S&P 500 has lagged behind global peers this year. The benchmark has climbed 16%, compared with the 28% rally in a worldwide MSCI index that excludes the US. In the coming years, the strategists expect emerging-market gains to be driven by strong earnings growth in China and India. Goldman Sachs has this advice for long-term investors: "Diversify beyond the US, with a tilt toward emerging markets." —Michael Msika

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The weakness in the Japanese yen is pushing the currency towards levels that have prompted authorities to step in. Traders are skeptical, though, that direct intervention will help as much this time around.

Unlike last year, when intervention took place in the runup to higher interest rates by the central bank, this time around Japan would be buying yen just as Prime Minister Sanae Takaichi signals her desire for a slowdown in rate increases.

Officials would also be wading into the market when Takaichi's plans to boost spending are fueling the yen's weakness. Additionally, any intervention would risk depleting Japan's foreign exchange reserves needed to help fund a US investment package to placate President Donald Trump.

"It's a different environment," said Marito Ueda at SBI FXTrade. "If Takaichi's policies head in the direction of fiscal expansion, even if the government can stop the yen's decline in the short term, it'll just go back to weakening."

The yen has fallen 4.5% against the dollar this quarter, the most among its Group of 10 peers, to about 154.

A weakening yen aids the country's mighty exporters by boosting the value of their repatriated earnings. But failing to act to limit the currency's depreciation could trigger criticism from Washington, with Trump previously complaining Japan has sought a trade advantage through foreign exchange policy. —Mia Glass and John Cheng

Source: Bloomberg Europe