The US in last place? Check out Goldman Sachs' global stock forecasts for the next decade.

• Goldman Sachs forecasts the US stock market to be the global laggard in the next decade.

• Bloated US stock valuations and limited earnings growth are behind the bearish outlook.

• Emerging markets and Asian stocks are expected to outperform due to stronger earnings prospects.

It can be easy to feel like US stock outperformance will continue after three years of a strong bull market, but the music is probably going to stop soon.

After outperforming the rest of the world for years, the US stock market appears to be on track to fall to last place over the next decade, according to Goldman Sachs.

In a note on Tuesday, the bank issued its forecast for annualized equity market returns across the globe. The US market is expected to return 6.5% a year to investors over the next decade, according to analysts, the worst in the world over the next 10-year period.

It also marks a significant deviation from the S&P 500’s historical trend, with the benchmark index returning an average of 10% a year over its lifetime.

Here are the reasons behind the bank’s downbeat prediction.

1. Valuations are high

Valuations for US stocks are some of the highest in the world. That explains part of the “downside” risk facing the US market, a team of analysts led by Peter Oppenheimer said.

The S&P 500 is currently trading at a 12-month forward price-to-earnings multiple of around 21.

Goldman thinks the S&P 500 could see annual returns as low as 3% or as high as 10% over the next decade, depending on whether markets veer toward its upside or downside scenario.

Valuations in the US are likely to decline 1% annually over the next decade, the bank added.

“If the profitability and/or valuations of the largest companies falter, unless another cohort of ‘superstars’ emerges, returns for the broad market will likely be hampered as today’s largest stocks fall back to earth,” analysts wrote of their bearish scenario for the US market.

2. Lackluster earnings growth

Corporate earnings are already strong in the US. That means profitability for large-cap companies is unlikely to improve meaningfully in the future, the bank suggested.

The blended net profit margin in the S&P 500 for the third quarter is around 13.1%, above the five-year average of 12.1%, according to FactSet.

“Many of the tailwinds to corporate profitability in recent decades are unlikely to boost profits to a similar extent going forward,” analysts wrote, pointing to how net profit margins and return on equity in the S&P 500 are hovering close to record-highs.

3. Stronger earnings around the world

Earnings are expected to be stronger in other global markets.

Annualized earnings per share growth in the US is projected to come in around 6% in Goldman’s base case.

That compares to around 9% expected annualized earnings per share growth in emerging markets and Asian stocks, excluding Japan, according to Goldman’s forecasts.

Strategists said they believe investors should diversify their portfolios, with a “tilt toward emerging markets” stocks in particular.

“We expect higher nominal GDP growth and structural reforms to favour EM, while AI’s long-term benefits should be broad-based rather than confined to US Technology,” analysts wrote, though they noted that growth would depend on how AI impacts the macro landscape around the world.

Other forecasters have floated the idea this year that the US market could be losing its dominance, particularly as the economy looks poised to weaken and tariffs complicate outlooks.

Ruchir Sharma, the chairman of Rockefeller Capital, said he believed the US’s outperformance in global markets could end in 2025 as investors start “punishing” the US for its growing deficits.

In June, more than half of global investors surveyed by Bank of America said they saw international stocks outperforming the US over the next five years.

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