Analysts at Vanguard have given a worse-than-expected performance forecast for the S&P 500 index and its top stocks. The ETF and mutual fund company forecasts U.S. stocks will rise just 3.5% to 5.5% annually over the next 10 years, sitting well below the S&P 500’s long-term average annual return of roughly 10%. This is in contrast to many recent forecasts for the index by Wall Street experts, so why is Vanguard so bearish?
In their latest note to investors, Vanguard suggests U.S. growth stocks will only return 2.3% to 4.3% annually in the next decade. That’s in stark contrast with recent years, where growth stocks have led the way. A large portion of this year’s roughly 17% return by the S&P 500 is due to megacap growth stocks. Hence, a sudden reversal by Vanguard is a worrying sign of things to come.
“Even at current stretched valuations, rising earnings growth could provide momentum for stocks in the near term,” Vanguard said. “However, our conviction is growing stronger that long-term prospects for U.S. equities are subdued.”
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Other Wall Street Remain Bullish on the S&P 500 Index
On the other hand, Top stock market strategists at JPMorgan have issued a bullish price forecast for the S&P 500 (^GSPC), signaling strong belief in the 2026 stock market. Indeed, the firm’s equity strategy team, led by Dubravko Lakos-Bujas, set a year-end price target of 7,500 for the index in 2026. “Despite AI bubble and valuation concerns, we see current elevated multiples correctly anticipating above-trend earnings growth, an AI capex boom, rising shareholder payouts, and easier fiscal policy (i.e. [One Big Beautiful Bill Act]),” the firm wrote in a note to clients at the end of November.
Furthermore, another bullish S&P 500 price prediction comes from Deutsche Bank. The bank is predicting the index to also breach the 8000 mark. Deutsche Bank cites AI-driven gains bolstering corporate earnings, which can usher in a golden new era for the S&P 500 to bank on. The bank was also quick to forecast how S&P earnings per share may end up hitting $320 per share.