Goldman Sachs warns of two major risks threatening the bull market in 2025, with the future return rate of the S&P 500 index possibly dropping to 3%.

Notice that as 2024 comes to an end, the US stock market has experienced a strong rebound driven by large technology stocks benefiting from artificial intelligence, resulting in significant returns. However, Goldman Sachs Group, Inc. warns that there are two major risks that could hinder the stock market feast in 2025. Lead by strategist Peter Oppenheimer, a research report released on Monday stated that the first major risk is the current wave of optimism - driven by Trump's election victory, low interest rates, and overall enthusiasm for the economy - which may bring early returns and make the market vulnerable to pullbacks. Goldman Sachs Group, Inc. strategists state that given the global stock markets have risen by 40% since October 2023, there is more room for disappointment and less opportunity for valuation increases. The upcoming policies of the Trump administration also pose uncertainties. They wrote, "For example, there are still many unknowns concerning tariff risks and their impact on global inflation." The president-elect has proposed implementing comprehensive tariffs, including levying tariffs of 10% to 20% on imported products from all countries, and specifically imposing tariffs of 60% to 100% on Chinese goods, which could raise prices for many key products in the US. In the days following Trump's victory, major stock indices such as the Dow Jones Industrial Average, the S&P 500, and the Nasdaq reached historic highs. The second risk is related to what Goldman Sachs Group, Inc. describes as "unusual market concentration." Researchers point out that the largest 10 stocks in the US account for over 20% of the total market index value globally. These companies include Apple Inc. (AAPL.US), Microsoft Corporation (MSFT.US), Amazon.com, Inc. (AMZN.US), NVIDIA Corporation (NVDA.US), Alphabet Inc. Class C parent company Alphabet (GOOGL.US), and Meta (META.US), among other large tech stocks. They make up 36% of the S&P 500 index, driving most of the returns. So far this year, the returns on these leading companies are close to 37%, while the return for the entire index is 31%. Goldman Sachs Group, Inc. states that this level of market concentration is related to a series of threats that the market faces, especially as large tech stocks transition from relatively light to capital-intensive. The bank states, "The expected returns on these investments may gradually diminish. Historically, it is difficult for any company to maintain high sales growth and profit margins over an extended period." Although there are doubts about whether these companies can sustain their current levels in the coming years, Goldman Sachs Group, Inc. does not believe these companies are in a valuation bubble. However, in a previous report, Goldman Sachs Group, Inc. warned that the era of double-digit stock market gains may be ending. The strategists estimate that the annualized return rate for the S&P 500 in the next 10 years will be 3%, significantly lower than the long-term average returns of 13% and 11% in the past decade. While the investment bank attributes much of this downward adjustment to a higher starting point for the next ten years, the strategists state that a significant amount of uncertainty can also be attributed to the "extreme market concentration." Goldman Sachs Group, Inc. states that if the market concentration is not as high, their forecast would be about 4 percentage points higher (annual return rate would be 7% instead of 3%), with the range being a growth of 3% to 11% in the next 10 years, rather than a potential -1% to 7%.