Finance
Experts push back on Goldman Sachs' forecast for low returns
A version of this post first appeared on TKer.co
Goldman Sachs’ that the S&P 500 will deliver 3% annualized nominal total returns over the next 10 years has gotten a lot of attention. (Read TKer’s view and .)
I think Ben Carlson of Ritholtz Wealth Management it best: “It’s rare to see such low returns over a 10 year stretch but it can happen. Roughly 9% of all rolling 10 year annual returns have been 3% or less… So it’s improbable but possible.”
Investors would probably love to hear a more decisive view. But , and these kinds of imprecise assessments are the best we can do as we manage our expectations.
That said, last week came with a lot of Wall Streeters pushing back on Goldman’s forecast.
JPMorgan Asset Management (JPMAM) expects large-cap U.S. stocks to “return an annualized 6.7% over the next 10-15 years,” .
“I feel more confident in our numbers than theirs over the next decade,” JPMAM’s David Kelly . “But overall, we think that American corporations are extreme — they’ve got sharp elbows and they are very good at growing margins.“
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Expectations for , , and have been hot topics lately. They’re trends that Ed Yardeni of Yardeni Research also expects to drive stock prices higher for years to come.
“In our opinion, even Goldman’s might not be optimistic enough,” Yardeni . “If the productivity growth boom continues through the end of the decade and into the 2030s, as we expect, the S&P 500’s average annual return should at least match the 6%-7% achieved since the early 1990s. It should be more like 11% including reinvested dividends.”
“In our view, a looming lost decade for U.S. stocks is unlikely if earnings and dividends continue to grow at solid paces boosted by higher profit margins thanks to better technology-led productivity growth,” Yardeni said.
Datatrek Research co-founder Nicholas Colas is encouraged by where the stock market stands today and where it could be headed.
“The S&P 500 starts its next decade stacked with world class, profitable companies and there are more in the pipeline,” Colas wrote on Monday. “Valuations reflect that, but they cannot know what the future will bring.“
He believes “the next decade will see S&P returns at least as strong as the long run average of 10.6%, and possibly better.“
Could something ‘very, very bad’ occur?
Colas noted that historical cases of
“History shows that 3% returns or worse only come when something very, very bad has occurred,” Colas said. “While we are relying on press accounts of Goldman’s research, we have read nothing that outlines what crisis their researchers are envisioning. Without one, it is very difficult to square their conclusion with almost a century of historical data.“
Because of the way Wall Street research is distributed and controlled, not everyone is able to access every report, including experts who may be asked to respond to them.
Goldman shared the report with TKer. Regarding the issue Colas flagged, Goldman does discuss those catalysts but actually highlights them as .
That said, very bad things have happened in the past, and they could happen again in the future. And those events could cause stock market returns to be poor.
“Forecasting one form of economic disaster or another over the next 10 years is not much of a reach; you will be hard-pressed to think of any decade where some economic calamity or another didn’t befall the global economy,” Barry Ritholtz of Ritholtz Wealth Management . “But that’s a very different discussion than 3% annually for 10 years.”
This leads me to my conclusion: It is very difficult to predict with any accuracy what will happen in the next 10 years. in their report. There are good cases to be made for weak returns as well as strong returns as argued by Yardeni and Colas.
Who will be right? We’ll only know in hindsight.
Generally speaking, I’m of the mind that the because we have a , and earnings are the . And there’s never been a challenge the economy and stock market couldn’t overcome. After all, .
“I have no idea what the next decade will bring in terms of S&P 500 returns, but neither does anyone else,” Ritholtz . “I do believe that the economic gains we are going to see in technology justify higher market prices. I just don’t know how much higher; my sneaking suspicion is one percent real returns over the next 10 years is way too conservative.”
Review of the macro crosscurrents
There were a few notable data points and macroeconomic developments from last week to consider:
Card spending data is holding up. From JPMorgan: “As of 15 Oct 2024, our Chase Consumer Card spending data (unadjusted) was 1.5% above the same day last year. Based on the Chase Consumer Card data through 15 Oct 2024, our estimate of the U.S. Census October control measure of retail sales m/m is 0.69%.“
From BofA: “Total card spending per HH was up 1.9% y/y in the week ending Oct 19, according to BAC aggregated credit & debit card data. Spending growth has recovered in the sectors that were most impacted by Hurricane Milton, e.g. clothing, furniture & transit. Even beyond these sectors, we saw broad-based increases in spending growth in the week ending Oct 19.“
Unemployment claims tick lower. declined to 227,000 during the week ending October 19, down from 242,000 the week prior. This metric continues to be at levels historically associated with economic growth.
Consumer vibes improve. From the University of Michigan’s : “Consumer sentiment lifted for the third consecutive month, inching up to its highest reading since April 2024. Sentiment is now more than 40% above the June 2022 trough. This month’s increase was primarily due to modest improvements in buying conditions for durables, in part due to easing interest rates.”
Home sales fall. decreased by 1% in September to an annualized rate of 3.84 million units. From NAR chief economist Lawrence Yun: “There are more inventory choices for consumers, lower mortgage rates than a year ago and continued job additions to the economy. Perhaps, some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election.”
Home prices cooled. Prices for previously owned homes declined from last month’s levels, but they remain elevated. From the : “The median existing-home price for all housing types in September was $404,500, up 3.0% from one year ago ($392,700). All four U.S. regions registered price increases.”
New home sales rise. jumped 4.1% in September to an annualized rate of 738,000 units.
Mortgage rates tick higher. According to , the average 30-year fixed-rate mortgage rose to 6.54%, up from 6.44% last week. From Freddie Mac: “The continued strength in the economy drove mortgage rates higher once again this week. Over the last few years, there has been a tension between downbeat economic narrative and incoming economic data stronger than that narrative. This has led to higher-than-normal volatility in mortgage rates, despite a strengthening economy.”
There are in the U.S., of which 86 million are and of which are . Of those carrying mortgage debt, almost all have , and most of those mortgages before rates surged from 2021 lows. All of this is to say: Most homeowners are not particularly sensitive to movements in home prices or mortgage rates.
Offices remain relatively empty. From : “Peak day office occupancy on Tuesday fell seven tenths of a point last week to 60.7%. Most of the 10 tracked cities experienced lower peak day occupancy than the previous week, likely due to the federal holiday on Monday. Los Angeles had its highest single day of occupancy since the pandemic, up 1.9 points from the previous Tuesday to 56.3%. The average low across all 10 cities was on Friday at 31.9%, down eight tenths of a point from the previous week.“
CEOs are less optimistic. The Conference Board’s in Q4 2024 signaled cooling optimism. From The Conference Board’s Dana Peterson: “CEO optimism continued to fade in Q4, as leaders of large firms expressed lower confidence in the outlook for their own industries. Views about the economy overall—both now and six months hence — were little changed from Q3. However, CEOs’ assessments of current conditions in their own industries declined.
Moreover, the balance of expectations regarding conditions in their own industries six months from now deteriorated substantially in Q4 compared to last quarter. Most CEOs indicated no revisions to their capital spending plans over the next 12 months, but there was a notable increase in the share of those expecting to roll back investment plans by more than 10%.“
Survey signals growth. From S&P Global’s : “October saw business activity continue to grow at an encouragingly solid pace, sustaining the economic upturn that has been recorded in the year to date into the fourth quarter.
The October flash PMI is consistent with GDP growing at an annualized rate of around 2.5%. Demand has also strengthened, as signalled by new order inflows hitting the highest for nearly one-and-a-half years, albeit with both output and sales growth limited to the services economy.”
Keep in mind that during times of perceived stress, soft data tends to be more exaggerated than actual hard data.
Business investment activity ticks higher. for nondefense capital goods excluding aircraft — a.k.a. — increased 0.5% to a record $74.05 billion in September.
Core capex orders are a , meaning they foretell economic activity down the road. While the growth rate has , they continue to signal economic strength in the months to come.
Most U.S. states are still growing. From the Philly Fed’s September report: “Over the past three months, the indexes increased in 34 states, decreased in 10 states, and remained stable in six, for a three-month diffusion index of 48. Additionally, in the past month, the indexes increased in 36 states, decreased in seven states, and remained stable in seven, for a one-month diffusion index of 58.”
Near-term GDP growth estimates remain positive. The sees real GDP growth climbing at a 3.3% rate in Q3.
Putting it all together
The outlook for the stock market remains favorable, bolstered by . And earnings are the .
Demand for goods and services as the economy continues to grow. At the same time, economic growth has from much hotter levels earlier in the cycle. The economy is these days as .
To be clear: The economy remains very healthy, supported by very . Job creation . And the Federal Reserve – having – has .
Though we’re in an odd period in that the hard economic data has . Consumer and business sentiment has been relatively poor, even as tangible consumer and business activity continue to grow and trend at record levels. From an investor’s perspective, is that the hard economic data continues to hold up.
That said, analysts expect the U.S. stock market could , thanks largely due to . Since the pandemic, companies have adjusted their cost structures aggressively. This has come with and , including hardware powered by AI. These moves are resulting in positive operating leverage, which means a modest amount of sales growth — in the cooling economy — is .
Of course, this does not mean we should get complacent. There will — such as , , , , etc. There are also the dreaded . Any of these risks can flare up and spark short-term volatility in the markets.
There’s also the harsh reality that and are developments that all long-term investors to experience as they build wealth in the markets. .
For now, there’s no reason to believe there’ll be a challenge that the economy and the markets won’t be able to overcome over time. , and it’s a streak long-term investors can expect to continue.
A version of this post first appeared on TKer.co
For decades, New York and London have defined the flow of global capital. But while markets still chase short-term returns in US equities, the next great wave of productive investment is taking shape in East Asia, led by China’s financing, manufacturing and export of the clean technologies that are remaking the global economy.
China is already deploying renewables, grid infrastructure and storage at a speed and scale unseen anywhere else, and can produce almost a terawatt of new renewable-energy capacity each year, enough to replace more than 300 nuclear power plants. In 2024 alone, clean-energy industries, including solar, wind, batteries, grids and electric mobility, accounted for more than 10 per cent of China’s gross domestic product.
The technologies developed and scaled in China have driven down global costs for everything from photovoltaics to grid batteries, making large-scale electrification economically viable across much of the developing world. As a result, China’s emissions may already be declining, and its exports of low-cost clean-energy systems are speeding up across the rest of Asia, Africa and Latin America.
Hong Kong already ranks among the world’s leading financial centres and leads Asia in green and sustainable bond issuance. Its asset and wealth management sector now exceeds HK$35 trillion (US$4.49 billion), supported by strong inflows.
Finance departments have traditionally been risk-averse, which has often led them to lag in adopting new technologies. This writer recalls finance leaders insisting that their company’s financial data was too proprietary to ever move into the cloud. Yet, this caution hasn’t always been the norm. Finance was among the earliest adopters of personal computers. PC-based spreadsheets revolutionized how financial work was done, transforming processes once handled on paper with a Texas Instruments or HP calculator. Those manual methods were slow and error-prone, so it was a godsend when spreadsheets made financial analysis faster, easier and far more accurate.
In fact, PCs became a status symbol in accounting — public accounting firms proudly showed off that everyone had the latest PC. Geoffrey A. Moore, in “Crossing the Chasm,” writes about the role of Lotus 1-2-3 in enabling its delighted early adopters “to do something they had never been able to do before — what later became popularized as ‘what if’ analysis.”
The question now is whether generative and agentic AI will fundamentally reconfigure how finance is done. Bruce Harris, director of financial systems and intelligence at Torchy’s Tacos, put it well in a recent interview with me.
“Every taco we sell is in our cloud data warehouse, and this data tells a story. By embracing agentic AI, we’re transforming finance from transactional to strategic,” he said. “Our agentic workflows automate the routine work, freeing our people to focus on insight, strategy, and growth. This isn’t about replacing talent — it’s about amplifying it.”
To explore this shift further, I spoke with experts at three ERP companies that are enabling agents for their finance customers:
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Andrew Kershaw, group general manager for the office of the CFO, Workday
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Joe Preston, vice president of product and design, Intuit
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Victor Alvarez, product marketing manager for Joule, SAP
Their perspectives are surprising and deserving of wider attention — especially for CIOs, I would wager. For many organizations, CFOs have been the executives to whom IT reported — or, at minimum, one of IT’s most demanding and consequential internal customers. Countless CIOs have seen their lives upended by ERP implementations that dragged on for years, consuming budgets, attention and every available set of hands. These “all-hands” moments have repeatedly locked CIOs into long cycles of implementation and reimplementation.
What will be interesting to watch now is whether the shifts underway — particularly, finance’s push to apply AI to become leaner, more automated and more strategic — trigger another implementation cycle. Interestingly, if finance can reimagine its operating model, CIOs may find themselves at the center of a very different partnership with the CFO.
From number crunchers to strategic advisors
Each of the ERP experts I spoke with made it clear that AI agents will automate transactional and compliance work, freeing finance professionals from manual tasks, including data entry, financial reconciliation and expense validation. With agentic AI, the boring, repetitive financial work is officially over — a welcome development for someone who had done financial analysis right after my first MBA. It was not my calling, but people who were STs in a Myers-Briggs assessment thrived in traditional accounting-type roles. What will this mean for those types?
AI agents will refine accounting and finance roles from transaction-heavy to insight-driven, shifting focus toward strategic analysis, decision support and business partnership. The hope, clearly, is that with the support of AI, finance teams can tackle previously “undone” work, unlock new productivity and enable faster, smarter business decisions.
Andrew Kershaw, group general manager for the office of the CFO, Workday
The AI opportunity for the CFO role
Here are excerpts from my discussions with Kershaw, Preston and Alavarez (lightly edited for clarity and brevity) on the importance and implications of applying AI to finance, starting with how AI will redefine the role of the CFO.
Andrew Kershaw, Workday: “Agents will accelerate the evolution of the CFO’s role, enabling [them to spend] the vast majority of their time on strategic opportunities across the business vs. managing transactional efficiency within their group. The core goal has always been the same: less time on transactions, more time on insights that drive the business forward. The value of agents lies in automating finance processes to help the CFOs and their teams both protect and grow value in the business.
“On the protection side, it’s about automating for greater accuracy, compliance and risk mitigation. On the growth side, it’s about unlocking insights to drive the business forward. By taking on tedious work that doesn’t require human judgment, agents free up teams to focus on strategy and high-value decisions. … This is how CFOs gain the credibility and capacity to stop spending time looking back and start spending it looking forward.
“It’s exciting because agents are moving beyond just surfacing insights to actually taking autonomous action, delving deeper into the data to understand variance or root cause of issues, then resolving an error or notifying the right people — effectively automating the workflow from insight to resolution.”
Joe Preston, Intuit: “While most financial tools give CFOs access to data … it’s challenging to cut through the noise and determine what’s valuable. Agentic AI identifies trends, connects and finds insights that are overlooked or hidden, helping CFOs understand not only where their business stands today but where it’s headed. Agents can provide a comprehensive approach to the financial management of growing, midmarket businesses with robust reporting, KPI analysis, and scenario planning and forecasting based on performance and peer benchmarking, helping CFOs and their finance teams make smart decisions to achieve their goals.”
Victor Alvarez, product marketing manager for Joule, SAP
A new division of labor in finance
AI agents are expanding automation by handling complex, multi-step and cross-functional workflows like invoice matching, cash collection and dispute resolution — while improving speed, accuracy and cash flow. With this said, our ERP experts noted that human expertise remains central.
Kershaw: “What sets AI agents apart is their ability to automate parts of finance that couldn’t be automated before. Past solutions struggled with ‘gray areas’ — tasks requiring judgment or cross-functional input. Now, agents handle these complex, insight-driven tasks, making finance workflows smoother and smarter. For example, in accounts payable, if an invoice doesn’t match a closed purchase order, agents can handle this autonomously, coordinating with other agents to resolve the issue, while still respecting the control environment.
“However, while agents are great at surfacing data and routing decisions, human judgment remains critical, especially for complex financial decisions. Agents will make it easier for decision-makers to act with confidence, but decisions that impact financial results require human oversight because someone needs to own the outcome. For example, AI can surface data for bonus accruals, but leadership must make the final call because executive alignment is required.”
Victor Alvarez, SAP: “Agents will handle common, multi-step workflows that require reasoning over data and business process context (e.g., invoice processing, dispute resolution, trade classification). They’ll also perform cross-functional workflows, such as cash collection involving finance, customer service and operations. Real-time decision support through recommending actions based on trusted, high-quality financial data is another significant benefit. For example, an accounts receivable agent doesn’t just automate receivables. It reasons through open items, balances, disputes, and dunning history to assess risk and prioritize follow-ups. It analyzes this context to flag high-risk receivables, recommends the next best actions and guides users with proactive, timely insights. Then it acts — initiating follow-ups, prompting responses and supporting resolution. This can result in less time spent managing overdue receivables, fewer write-offs through early risk detection and improvement in DSO to strengthen cash flow.”
Joe Preston, vice president of product and design, Intuit
Can finance learn to trust AI with its data?
AI complements — does not replace — human expertise, with people providing essential context, oversight, and ethical judgment in decision-making. Security, data integrity and privacy are paramount but will require finance leaders to understand how AI reaches conclusions to ensure accountability and compliance.
Kershaw: “Beyond the need for AI to act in an auditable, correct and repeatable manner, currently, the biggest hurdle for finance organizations isn’t understanding the value of AI — it’s reimagining what’s possible and adopting new ways of working. On reimagining possibilities, finance leaders aren’t used to AI agents providing instant, strategic recommendations instead of their having to manually track down information. Regarding new ways of working, finance teams must adapt to new workflows, including closer collaboration with IT.”
Preston: “Organizations need to keep in mind that AI complements human intelligence. While AI automates certain tasks and surfaces valuable information, human expertise is critical to ensure the right context and decision-making is applied. It’s also important for firms to remember that public AI tools may lack the secure environment needed when analyzing client data.”
Most exciting tasks to automate with AI agents?
The biggest challenge for finance leaders is not about recognizing AI’s value but reimagining what’s possible with AI. Here’s Kershaw’s take.
Kershaw: “Two areas: contracts and cost/profitability analysis. They are exciting because they represent the removal of very time-consuming and cumbersome activities that unlock incredible value.
“First, consider contracts. With a revenue contract agent, for example, AI automatically reads incoming contracts, sorts them by type and extracts all the critical data points like customer name, payment terms and total contract value. Crucially, the AI is continuously monitoring your entire portfolio and surfacing key insights through interactive dashboards, giving finance professionals insight into things like built-in rate increases tied to inflation that could automatically expand your revenue.
“Second, profitability isn’t just about one big number; it requires analyzing the true cost of operations for both direct and indirect costs and providing clear transparency into how shared resources are consumed. Agentic AI allows accountants and finance professionals to allocate indirect costs daily — such as management fees, utilities, IT and marketing — down to the individual outlet.”
Parting words
As each of the ERP experts made clear, finance organizations are on the precipice of significant change. For a profession developed as Columbus sailed the ocean blue, the change and disruption that it is about to experience is earth-shattering. In “Epic Disruptions: 11 Innovations That Shaped our Modern World,” Scott D. Anthony writes that “disruption is an engine of progress. By making the complicated simple and the expensive affordable, it transforms how we work, play, live and communicate.” Nowhere will this transformation be clearer than in accounting and finance as agentic AI takes hold.
In a world where the books of the company largely run themselves, it will be the more cerebral accounting and finance people who are in demand. These survivors will not only understand the books but also be able to make concrete suggestions on achieving business transformation.
Demonstrating this line of sight into business transformation will be a challenge similar to what happened to the CIO and their teams since the COVID-19 pandemic: the ones who survived underwent personal transformation, in many cases adopting a new mindset and skill set.
This time, the personal transformation is required by the CFO and their key reports in order to lead the next wave of change. And just like with CIOs and their teams in the wake of the pandemic, not everyone will be capable of making the change.
A 46-year-old finance executive died after collapsing at Chaudhary Charan Singh International Airport in Lucknow late on Friday, officials said on Sunday.
Anup Kumar Pandey, employed with a multinational beverage corporation, suddenly fell ill in the airport’s parking area shortly after arriving to board a flight to Delhi. Airport staff rushed him to Lok Bandhu Hospital, where doctors declared him dead.
“Initial findings suggest a heart attack, but the exact cause will be confirmed after the autopsy report,” said Sarojini Nagar station house officer Ramdev Ram Prajapati. The autopsy was conducted on Sunday.
According to officials, Pandey left Kanpur for Lucknow by car but was delayed due to traffic congestion on the route to the airport.
Pandey, originally from Kalyanpur in Kanpur, was living in Bengaluru with his wife, son and daughter. He had travelled to Kanpur five days earlier to attend a cremation ceremony.
The family said the fear of missing his flight caused significant stress, and he was rushing inside the airport when his condition deteriorated, causing him to collapse. Police said Pandey was going to board an Air India flight and not IndiGo, which has been hit by a spate of cancellations in recent days.
“At about 10:10 hrs, a passenger named Anup Kumar Pandey, travelling by flight AI-1821, Lucknow to Delhi, suddenly lay down on the ground. The family was informed, and the post-mortem examination was conducted on Sunday after his relatives reached Lucknow,” said ACP Krishna Nagar Rajneesh Verma.
According to the family, he was scheduled to return to Bengaluru via Delhi on the 10.30pm flight.
Police arrived at the spot soon after and initiated legal formalities.
His brother Anil, who arrived from Kanpur, was present during the post-mortem.
With frequent flight cancellations over the weekend, Pandey’s wife and children are travelling from Bengaluru to Lucknow by road.
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