US stocks will underperform other international markets over the next 10 years, according to top broker Goldman Sachs.
The prediction comes amid strong global interest in US shares and exceptional annual returns over the past few years.
Australian investors are well aware of this trend and have piled into US stocks via exchange-traded funds (ETFs).
But now, Goldman suggests investors start thinking of diversifying away from US shares and into other global markets.
Looking at the decade ahead, Peter Oppenheimer, chief global equity strategist at Goldman Sachs Research, said:
We expect higher nominal GDP growth and structural reforms to favor emerging markets, while artificial intelligence's long-term benefits should be broad-based rather than confined to US technology stocks.
A declining US dollar could also favor non-US equities, adding an extra layer of opportunity for globally diversified portfolios.
Right now, the US market is killing it.
Over the past two Australian financial year periods, US shares have outperformed the local bourse by a significant margin.
In the 2025 financial period, the S&P 500 Index (SP: INX) rose by 13.63% and delivered total returns (including dividends) of 15.16%. The Dow Jones Industrial Average (DJX: .DJI) lifted 12.72% with total returns of 14.72%.
By comparison, the S&P/ASX 200 Index (ASX: XJO) rose by 9.97% and provided total returns of 13.81%.The S&P/ASX All Ordinaries Index (ASX: XAO) lifted 9.47% and delivered total returns of 13.23%.
In the 2024 financial period, the S&P 500 rose by 23.31% and delivered total returns of 25.02%, while the Dow Jones Industrial Average rose by 12.88% and gave a total return of 14.99%.
By comparison, ASX 200 shares rose by 7.49% and gave a total return of 11.44%, and the ASX All Ords rose by 7.55% and delivered total returns of 11.44%.
However, looking ahead, Goldman Sachs says America's dominance in global investors' portfolios will not continue.
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US shares: Goldman's hot tip for investors
Goldman says US shares will underperform other trading regions, based on total average annual returns, over the next 10 years.
As this table below shows, Goldman expects US shares to provide an average annual return of more than 6.5% over the next decade.
This is less than the broker's predicted average annual returns for Europe, Japan, Asia ex-Japan, and emerging markets.
The broker says the US market's performance will be driven by earnings per share (EPS) growth and modest dividends over the next decade.
Goldman expects US stock valuations to trend lower, with share buybacks providing some compensation for lower share prices.
The broker foresees the best average annual total returns coming from emerging markets, driven by China and India.
| Region | Average annual return | Drivers |
| US | +6.5% | Driven primarily by EPS growth, with valuations trending lower and dividends remaining modest |
| Europe | +7.1% | Balanced contributions from earnings and shareholder distributions, including about a 3% dividend yield |
| Japan | +8.2% | Underpinned by EPS growth of 6% and and policy-led improvements in dividends and buybacks |
| Asia ex-Japan | +10.3% | Aided by about 9% EPS growth and 2.7% dividend yield, partly offset by valuation derating |
| Emerging markets | +10.9% | Led by strong EPS growth in China and India. We also see improving shareholder returns supported by policy reforms |
Source: Goldman Sachs
Goldman Sachs points out that weakness in the US dollar has historically coincided with an outperformance in non-US markets.
Some global investors also feel concerned that AI may be a bubble, given high valuations for US technology companies and rising business investment into AI that is yet to translate into significant productivity and earnings growth at scale across the broader market.
Others are concerned that the Magnificent 7 US stocks of Apple Inc, Microsoft Corp, Nvidia Corp, Amazon.com Inc, Meta Platforms Inc, Tesla Inc, and the two Alphabet Inc stocks, GOOGL and GOOG, represent too large a chunk of the US market.
Therefore, any pullback in their price trajectory could weigh heavily on US stock indices, which would impact many investors around the world given the popularity of index-tracking ETFs.
However, Eric Sheridan, also from Goldman Sachs Research, does not think the US tech sector is in a bubble.
Evidence of that includes most of the Mag 7 still generating large free cash flows, conducting buybacks, and paying dividends.
