Investors may need to temper their expectations for the stock market over the next year, according to Goldman Sachs chief global equity strategist Peter Oppenheimer.
After a strong run for global equities, Oppenheimer expects returns to slow from the pace investors have experienced over the past year.
“We should acknowledge that the S&P 500 and indeed other equity markets around the world have had a phenomenal return over the course of the last year and year to date,” Oppenheimer told Yahoo Finance. “So we’ve already had a lot of good returns behind us. We would expect lower returns from here.”
Oppenheimer expects most major equity markets to generate mid- to high-single-digit returns over the next 12 months, assuming economic growth remains intact.
That outlook would represent a significant moderation from the gains seen across global markets over the past year. The S&P 500 is already up roughly 12% in 2026, adding to the substantial gains investors have enjoyed since the market’s previous lows.
Rising Bond Yields Create a Headwind
One of the biggest risks facing stocks is the continued rise in global bond yields.
The yield on the 10-year U.S. Treasury recently reached its highest level since 2023. Because Treasury yields influence borrowing costs throughout the economy, higher rates can put pressure on everything from mortgages and corporate financing to equity valuations.
The 30-year Treasury yield has also moved toward levels not seen in nearly two decades.
The increase in yields isn’t limited to the United States. Government bond markets across several major economies have experienced significant selling pressure.
Japan’s 10-year government bond yield recently moved above 3% for the first time since 1996, while Britain’s 10-year yield reached its highest level since 2007. Germany’s 10-year yield has also climbed to levels last seen during the European debt crisis.
For now, equity markets have largely absorbed the move higher in yields. But strategists warn that could change if interest rates remain elevated.
“The stock market has been able to ignore these moves so far this year. However, as we have seen in the past, higher yields don’t matter for stocks … until they do,” Miller Tabak strategist Matt Maley said.
Higher yields can become particularly challenging for stocks when they begin to compete more directly with equities for investors’ capital while simultaneously increasing the discount rate used to value future corporate earnings.
Oil Prices Add Another Layer of Uncertainty
Energy prices are creating another potential challenge for markets.
Crude oil has climbed above $90 per barrel amid heightened geopolitical tensions involving Iran and concerns surrounding the Strait of Hormuz.
Higher oil prices can filter through to the broader economy by increasing transportation, manufacturing and agricultural costs. If elevated energy prices persist, they could also make it more difficult for inflation to continue moving lower.
Commodity prices, including agricultural products such as corn and sugar, have also risen sharply in recent weeks, adding to concerns about future consumer costs.
“Bottom line, higher oil is pushing yields higher and higher yields are pressuring stocks,” Sevens Report Research founder Tom Essaye said.
Essaye added that until that relationship begins to unwind, continued weakness could be concentrated in growth-oriented and economically sensitive areas of the market.
What Investors Should Watch
The combination of elevated valuations, rising bond yields and higher energy prices creates a more challenging backdrop for stocks than investors have experienced during the market’s recent rally.
That doesn’t necessarily mean a major market decline is imminent. Goldman Sachs’ Oppenheimer still expects positive returns over the next 12 months if economic growth remains healthy.
But his forecast suggests investors may need to become more selective.
After a strong period for equities, the next phase of the market could be characterized less by broad-based gains and more by differences in earnings growth, valuation and sensitivity to interest rates.
For investors, the message is relatively straightforward: the market can continue to rise, but the unusually strong returns of the recent past may be difficult to repeat.
