Bank of America forecasts negative price returns for S&P 500 over next decade

Equity strategists at Bank of America told clients to focus on dividends and growth given their forecast for slightly negative price returns for the S&P 500 over the coming decade.

"Total return is the number to optimize, and we see dividend preservation and growth as the single most important criteria for stock selection, which could potentially be the difference between a flat-to-negative and positive return over the next 10 years in the S&P 500," they said.

Their year-end forecast for the benchmark index, based on their five-factor framework, stood at 4,600.

Their long-term valuation framework - which explained roughly 80% of long-term returns - suggested -0.5% annual returns for over the next 10 years, their first forecast for negative returns since 1999.

And things weren't looking much better from now until the end of 2022, given "extended" valuations and a plethora of headwinds, including peak margin risk due to supply chain disruptions, labour inflation, potential tax hikes, the energy crisis, risks to Chinese GDP and peak globalisation.

That was on top of what they termed "near-euphoric" sentiment.

Their year-end 2022 forecast meanwhile, based on their five-factor framework, for the benchmark index stood at 4,600 and for 2021 t 4,250, with the latter implying more downside risk.