Key Takeaways
- Emerging markets, led by India and China, are projected to deliver 10.9% annual returns over the next decade.
- India is forecast to achieve the highest earnings growth globally at 13% CAGR.
- Goldman Sachs recommends diversification toward emerging markets amid elevated US valuations.
Emerging markets, particularly India, are positioned for the strongest equity market performance globally over the coming decade, according to Goldman Sachs’ latest strategic forecast. The investment bank projects emerging markets will deliver 10.9% annualized returns, significantly outperforming developed markets including the US (6.5%), Europe (7.1%), and Japan (8.2%).
India and China Lead Growth
The report identifies robust earnings per share (EPS) growth in India and China as the primary driver of emerging market outperformance. Both nations benefit from policy reforms that support improving shareholder returns.
India stands out with the highest projected earnings growth globally at 13% compound annual growth rate (CAGR), fueled by strong economic fundamentals and favorable demographic trends.
Global Equity Outlook
Despite current valuation concerns, Goldman Sachs maintains a positive long-term outlook for global equities, forecasting 7.7% annual returns in USD terms. “Our forecast sits close to the historical median, supported by structural drivers such as nominal growth, profitability, and shareholder distributions,” the report stated.
Earnings growth remains the primary performance engine, with global earnings including buybacks expected to compound at approximately 6% annually. Dividends will contribute the remainder of returns, while valuations are projected to ease modestly from current highs.
Investment Strategy Implications
The report suggests that elevated US valuations make a compelling case for diversification toward emerging markets. “Higher nominal growth and improving market structures modestly favour EM over DM,” Goldman Sachs analysts noted.
For the S&P 500 specifically, the firm forecasts average annual total returns of 6.5% over the next decade, with potential outcomes ranging between 3% and 10% depending on market conditions.
