Where Will The S&P 500 Be By 2030? Here's One Prediction

Despite another abysmal weekly jobs report, the SPDR S&P 5000 ETF Trust SPY is now up 13.5% overall in the month of April.

The good news for investors is that the April rally has restored confidence in the market in the near-term. Unfortunately, Bank of America analyst Savita Subramanian said Thursday the rally has also made stocks expensive once again, putting the market in a position to underperform over the next decade.

10 Years Down The Road

If there’s one thing that almost all investors can agree at this point, it’s that it’s extremely difficult to predict where the market and the economy are headed in the next couple of months. In the longer term, Subramanian said the S&P 500’s current valuation coupled with plummeting earnings outlooks for 2020 suggests the S&P 500 may limp its way through the 2020s.

“Based on regressions, today’s valuations suggest S&P 500 annualized 10-yr price returns of 4%-5%,” Subramanian said.

Since 1947, the S&P 500 has produced roughly 8% annual gains, suggesting the current environment may be a historically bad entry point for investors.

In terms of a price target, Bank of America is targeting S&P 500 4,100 to 4,500 by 2030, between 47% and 61% overall upside over the next 10 years.

Subramanian said valuation metrics such as forward earnings multiples are typically relatively poor predictors of near-term market movements. However, they have historically been extremely reliable indicators of longer-term market trends.

Benzinga’s Take

Knowing the next 10 years will be a difficult decade for stock investment doesn’t do investors too much good at this point given interest rates are essentially at zero. Given a lack of viable alternatives to stocks, investors may simply be forced to take what they can get out of stocks while underlying fundamentals catch up to the red-hot market.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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