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🧠 Are We Headed for a Lost Decade?

January 2, 2025
3 mins Read time
Welcome to Long-Term Mindset, the Wednesday newsletter that helps you invest better.
• Lesson:
Goldman predicts just 3% returns. Are they right?
• Timeless Content:
Has the easy money been made?
• Thread:
Buffett's Golden Rules
• Resource:
How to find company earnings dates easily
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Friends,

Goldman Sachs made waves last month by saying it expects stocks to return just 3% annually over the next decade. That would mean just 34% for ALL of the next decade.

To put that in context, stocks have returned 13% annually (240% total) over the past decade.

In other words: Goldman is warning of another Lost Decade.

The crux of Goldman's prediction:

  • Starting valuations are high
  • The S&P 500 is more concentrated right now -- with just seven stocks accounting for over 30% of the index -- than at any point in recent history.
  • These companies -- Amazon, Alphabet, Apple, NVIDIA, Tesla, Meta, and Microsoft -- are growing fast, with wider margins, than large companies have achieved at any point in recent history.
  • Eventually, these growth rates and margins will come back to earth.

We believe there are two very important things to point out:

  1. The S&P 493: If you invest in ETFs, there's little doubt you've got a ton of exposure to the Magnificent 7. At the same time, if you invest in individual stocks outside of this small group, your returns could diverge wildly from the S&P 500 writ large.
  2. Historical precedence: It's always smart to check the scorecard on someone making predictions. As you can see, Goldman's 2012 prediction came in at the high end of its range. And the 2020 forecast is thus far above even the high-end of the forecast.
Source: Goldman Sachs

All of this is to say that a prediction is a prediction. Nothing more.

We can't predict the future, but here's what we're willing to bet on: buying wide-moat businesses that are solving the world's problems -- for reasonable prices -- is the most reliable way to increase your wealth over the long run.

We don't see that changing any time soon.

Wishing you investing success,

Brian Feroldi, Brian Stoffel, & Brian Withers

Long Term Mindset
P.S. What do you think returns will be over the next decade? Reply to this email to let us know.

One simple graphic

One piece of timeless content

If you are spooked by the Goldman Sachs report referenced above or the future of the market in general, you might need a dose of Morgan Housel. Back in 2015, he wrote a piece called This Was Never Easy, sharing how the media never gets tired of saying, "The Easy Money Has Been Made."

One Thread

Thread on 50 GOLDEN RULES of Warren Buffett ( One Rule Per Day)

Day 1:

4 Filters Of Investing. pic.twitter.com/8Or1AbT6Lg

— Vivek (@Vivek_Investor) May 2, 2020

One resource

"Earnings season" is right around the corner. Want to know which companies are reporting this week or next? Finchat's earnings calendar is a great resource. Simply select a time frame or pick a company of interest. Sort by market cap (largest on top) to find the most popular companies. Best of all, it's free!

If you've consumed some great investing content recently, reply to this email with the link, and we might include it in a future newsletter.

One quote

Brian Feroldi

Brian Stoffel

Brian Withers

More from us:

EBITDA vs EBIT vs Earnings Explained Simply

Why You Should Buy Amazon Now

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