Here's the Average Stock Market Return in the Past 10 Years, and What Wall Street Expects in the Future

Collectively, about 6,000 companies are listed on the New York Stock Exchange and the Nasdaq Exchange, according to the Securities Industry and Financial Markets Association (SIFMA). Many of those companies are grouped into major indexes that measure various aspects the domestic market.

However, the S&P 500 (SNPINDEX: ^GSPC) is generally considered the best barometer for the overall U.S. stock market due to its scope and diversity. Read on to see the S&P 500's average return over the last decade, and to learn what Wall Street expects in the future.

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S&P 500: 192% return over the last decade (11.2% annually)

The S&P 500 was created in 1957, though its precursor was introduced in the 1920s. The index measures the performance of 500 large U.S. companies that cover approximately 80% of domestic equities and 50% of global equities by market capitalization. It includes stocks from all 11 market sectors, though it is most heavily weighted toward the technology sector.

Companies must meet specific requirements to be eligible for inclusion in the S&P 500, such as GAAP profitability and a minimum market value of $20.5 billion. The index is rebalanced quarterly, typically on the third Friday of March, June, September, and December. The 10 largest holding are listed by weight below:

1. Apple: 6.9%
2. Microsoft: 6%
3. Nvidia: 5.7%
4. Amazon: 4.3%
5. Alphabet: 4.2%
6. Meta Platforms: 2.9%
7. Tesla: 2.2%
8. Broadcom: 2%
9. Berkshire Hathaway: 1.6%
10. JPMorgan Chase: 1.4%

Excluding dividends, the S&P 500 advanced 192% during the last decade, compounding at 11.2% annually. If dividends are included, the S&P 500 achieved a total return of 249% over that period, compounding at 13.3% annually. That period covers a broad range of economic and market environments, so similar returns are possible over the next decade.

However, the S&P 500 currently trades at 22.2 times forward earnings, a material premium to the 10-year average of 18.3 times forward earnings. Unfortunately, such a high valuation hints at worse returns in the future. Historically, a forward price-to-earnings multiple of 22 has correlated with annualized returns between negative 2% and positive 2% over the next decade, according to JPMorgan Chase.

Having said that, every situation is unique, which means past performance is never a guarantee of future results. So, let's look at what certain Wall Street firms expect in the coming years.

Image source: Getty Images.

What Wall Street expects in the coming years

In the coming years, most Wall Street analysts agree that artificial intelligence will be an important tailwind, and they expect elevated valuations to be a headwind. Even so, analysts interpret those variable differently, such that forecasts range from extremely bearish to extremely bullish. Detailed below are the long-term outlooks from five Wall Street firms:

• Goldman Sachs expects the S&P 500 to achieve a total return of 3% annually through 2034 as historically expensive valuations and unusually high concentration -- the 10 largest stocks account for about 37% of the index -- drag on the market.
• JPMorgan Chase estimates the S&P 500 will achieve a total return of 6.7% annually over the next 10 to 15 years as productivity gains from AI are offset to some degree by currently elevated valuations.
• Morgan Stanley thinks the S&P 500 will trade sideways in the coming decade. "Given where valuations are today, over the next 10 years, the returns from point A to point B will be basically flat-ish, on a real basis, maybe negative," according to CIO Mike Wilson.
• Tom Lee at Fundstrat Global Advisor estimates the S&P 500 will reach 15,000 by 2030 as the global labor shortage boosts AI stocks and millennials (the largest generation) reshapes the economy. His forecast implies annual returns of 20% over the next five years.
• Yardeni Research believes the S&P 500 will reach 10,000 by 2030 as AI drives productivity and boosts profit margins. That forecast implies annual returns of 10.3% over the next five years.

Outlooks concerning the U.S. stock market vary widely among Wall Street analysts, which illustrates an important point: It is impossible to consistently predict the performance of the S&P 500.

So, the most prudent strategy is to buy good stocks (those with earnings likely to be much higher in the future) and hold them for as long as the investment thesis remains sound. Investors who follow that strategy over the next decade will likely turn a satisfying profit, regardless of what the S&P 500 does.

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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Goldman Sachs Group, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.