Chart of lagged returns for the S&P 500 over the long term

The company’s 6.5% yield forecast only makes sense once you examine the underlying math, which includes consistent 6% earnings growth, moderate valuation headwinds, and a modest dividend yield.

It’s a reminder that the next 10 years won’t reward investors chasing euphoria, but will reward companies that grow consistently, price smartly, and deliver real results.

Goldman’s call for evaluation is straightforward.

The company believes that today’s P/E levels are “too high compared to history” and, more importantly, cannot be sustained once the structural tailwind that was turbocharging margins fades.

Their updated model now indicates fair value Price-to-earnings ratio 21 times by 2035This indicates a gradual decline from the current 23x ratio.

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Their reasoning is based mainly on a few constraints.

First, profit margins are already close to record levels after jumping off of them 5% in 1990 to approximately 13% today. This increase was primarily driven by global supply chain efficiency, as well as decades of lower interest and tax expenses. Goldman feels these tailwinds are unlikely to be repeated.

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Second, the company includes a 4.5% yield on 10-year Treasury bonds Within its framework, which leaves almost nothing for ratings to grow from here.

Hence, the result is mostly a contract defined by profits, rather than a multiple extension.

Moreover, Goldman’s call reaches a point where corporate America continues to over-deliver. It has seen consecutive quarters of broad earnings, which indicates that the engine is running hotter than expected.

Q2 wasn’t exactly a “mag 7” mirage.But it was a complete earnings upgrade. By August, 66% of the S&P 500 reported… It ended up 82% beating EPS estimates While 79% exceeded sales. Blended EPS growth was higher at 10.3% year over year, more than 50% of the pre-season forecast of 2.8%.
The third quarter kept the momentum going. Two-thirds of companies have already reported results, with 83% beating earnings per share estimates while 79% beating sales expectations, comfortably above the five- and 10-year averages. The index appears to be on track for 10.7% earnings growth, its fourth straight quarter of double-digit final gains.
Big tech companies carry the league. In both the second and third quarters, eight of the S&P’s 11 sectors reported year-over-year earnings growth, while 10 sectors increased sales, fueling a streak of sustained revenue expansion for 19 and then 20 quarters.

Goldman’s long-term calculations make a simple point for US investors: the best returns over the next 10 years will not come from the US at all.

Although the S&P 500 is healthy 6.5% Baseline, Goldman highlights Emerging markets +10.9%, Asia excluding Japan +10.3%and Japan +8.2%.

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Emerging markets and Asian markets typically benefit from strong expansion in nominal GDP coupled with structural reforms, including rising payout ratios, which Goldman Sachs expects will lift emerging market dividend yields from 2.5% to 3.2% By 2035.

If we add governance upgrades in regions like Korea and China, these regions suddenly feel like composite machines.

But the real factor is the currency.

Forex strategists at Goldman Sachs believe the US dollar is 15% overvalued, and expect a decade-long reversal that would push the US dollar higher. Emerging markets returns translated into US dollars at 1.7% per year. Historically, dollar-related weakness coincides with outperformance in foreign markets.

Also, there is earnings power that investors should consider.

It drives EPS growth in emerging markets China and Indiawhich pushes the base yield to 10.9%. Japanese reforms are expected to increase profits 8.2% He comes back.

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This story was originally reported by The Street On November 15, 2025, he first appeared in Investment to divide. Add TheStreet as Favorite source by clicking here.