IS A LOST DECADE AHEAD FOR STOCKS?

Some Wall Street strategists foresee stagnant returns, but not all agree.

- ANNE KATES SMITH

A battle between the bulls and the bears is brewing on Wall Street, and the argument is not about where the stock market is headed in the next year or two but for the rest of the decade and beyond.

Depending on who's right, investors could be in for another lost decade-like the one from 2000 through 2009, when the S&P 500 index ended not far from where it began. Or investors could enjoy 10 years' worth of decent gains, if not the to-themoon returns we've seen lately.

Analysts at Goldman Sachs kicked off the debate in late October when they released their latest 10-year forecast, which calls for total returns of 3% annualized for the S&P 500 over the next 10 years. The firm believes that's the most likely return scenario, within a range of -1% and 7%. For context, the broad-market benchmark returned 13% over the past 10 years. Goldman's baseline, 3% forecast would rank in the seventh percentile for 10-year S&P 500 returns going back to 1930.

The forecast implies a 72% probability that the broad-market index will underperform bonds and a 33% likelihood that stocks will generate a return that trails the rate of inflation.

Goldman's rationale for the dismal outlook hinges on the market's current, high valuation at the starting point of the forecast horizon-typically, high valuations signal subpar returns are ahead. But another drag on future returns is the current concentration of market value in a small number of tech-related behemoths. "Our forecast would be four percentage points greater if we exclude market concentration that currently ranks near the highest level in 100 years," Goldman's strategists write.

They're not the only ones sounding a super-cautious note.