💰 5 Fact Friday: Why Goldman’s Wrong

MARKETS
1. Betting Big Against Goldman’s Forecast 🚫

Goldman Sachs just rained on Wall Street’s parade with a prediction that the S&P 500’s returns could shrink to 3% annually over the next decade—down from the 13% gains of the past 10 years. They see a 72% chance that stocks will underperform Treasury bonds and a 33% chance they’ll even lag inflation.

But I’m betting my net worth they’re wrong. Here’s why:

Such low returns over a 10-year stretch are rare—only about 9% of rolling 10-year periods have seen 3% or lower returns. And when did those happen?

• Great Depression

• 1970s stagflation

• Great Financial Crisis

Are we really facing another economic era that dire? It’s always possible, but it’s been a losing (and costly) bet historically.

If the post-COVID rally taught us anything, it’s that government spending can prop up stocks. And as long as campaign promises keep the votes coming, I don’t see the political will to reverse spending trends, unfortunately.

The real question is whether that spending will be effective.

If spending fuels economic growth, stocks win. If it drives inflation instead, that’s supposed to hurt. But recently, high interest rates led to record interest income, insulating the ownership class and boosting asset prices.

Bottom line: As long as Uncle Sam keeps the fiscal fire hose running, stocks have room to rise—even if it’s not the explosive growth we’ve gotten used to.

Goldman’s main worries? The heavy concentration in a few tech giants and lofty valuations. Fair point—it’s risky when a handful of stocks dominate. But that doesn’t mean the entire market has to suffer.

We’ve already seen signs of a market shift. Tech is the only S&P 500 sector down since July 10, yet the index keeps hitting new highs.

So, what’s my take? I'll keep my chips in the game.

A bet on stocks is a bet that the U.S. economy can stay resilient, even as the headlines get gloomier.

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STOCKS
2. Hottest Headlines In The Market 📰

Walmart Enters The Prescription Delivery Game 🚚
Walmart is joining the prescription delivery battle, going toe-to-toe with Amazon and startups like Capsule. Walmart now offers same-day delivery for free for Walmart+ members ($9.95 fee for everyone else). Traditional pharmacies like CVS and Walgreens are feeling the heat—CVS is down 29% YTD and Walgreens is down a brutal 64%.

Boeing’s Labor Struggle Continues ✈️
Boeing can’t catch a break. The company offered striking workers a 35% wage increase over four years, a $7,000 bonus, and bigger 401(k) contributions. Workers rejected the proposal—for the third time.

McDonald’s Faces E. Coli Crisis 🍔
McDonald's is reeling from an E. coli outbreak linked to slivered onions, resulting in 49 reported cases across 10 states, 10 hospitalizations, and one death in Colorado. As a result, the Quarter Pounder has been temporarily removed from menus in affected locations. Chipotle took four years to recover from a similar crisis—McDonald’s investors are hoping for a speedier comeback.

Target Slashes Prices Ahead Of Holidays 🎯
Target’s holiday strategy? Deep discounts. The retailer is cutting prices on 2,000 items, from home goods to toys, after a similar move in May helped boost profits by 36%. It’s a clear signal: Target’s ready to compete for holiday shoppers.

Peloton Finds A New Fan In David Einhorn 🚴
Peloton signed a deal to sell their bikes at Costco, and hedge fund CEO David Einhorn took the opportunity to sing its praises. At the Robinhood Investors Conference, he pitched Peloton as a value buy—while riding one of their bikes. Shares have jumped 17% this week, adding almost $4 million to Einhorn’s position.

REAL ESTATE
3. The Sorry State Of Real Estate 🏡

Existing home sales this year are on pace for their worst year since 1995—for the second straight year. After a brief dip in mortgage rates, the housing market returned to its familiar 2024 pattern: stagnant and expensive.

Sales dropped 1% from August, down 3.5% year-over-year, as buyers continue to hold back. The only region seeing a glimmer of life? The West, where activity ticked up on both a monthly and annual basis.

Despite the sales slump, prices continue to defy gravity.

The median existing home sales price rose for the 15th straight month to $404,500. And if that wasn’t enough to make homeownership feel like a distant dream, home insurance costs have climbed nearly 40% since 2019.

In this high-priced market, three trends are dominating:

1. Cash Is King: Cash buyers accounted for 30% of sales in September, up from about 20% pre-pandemic.

2. Investors Hit Pause: Individual investors and second-home buyers pulled back, making up just 16% of sales—down from a peak of 21% during the 2021 buying frenzy.

3. First-Time Buyers Are Waiting: First-time buyers comprised only 26% of sales in September, matching August’s all-time low.

Until mortgage rates drop further or prices cool, the market is likely to remain in a holding pattern—leaving many hopeful buyers sitting on the sidelines.

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ECONOMY
4. The 20% Tax Ceiling 🏦

This is Part 3 of 3 on why economic growth is the key to solving America’s debt dilemma. Last week, we discussed why printing money won’t work. Today, let’s talk about why raising taxes isn’t the solution either.

In theory, higher taxes should mean more tax revenue, but reality is messier.

History shows that beyond a certain point, tax hikes fail—dampening growth, driving capital away, and ultimately shrinking the tax base.

Despite the U.S. experimenting with top marginal tax rates from 94% to 31%, government receipts as a share of GDP have a ceiling of about 20%. Translation? The key to more revenue isn’t raising taxes, but growing the economy.

This idea is summed up by the Laffer Curve, which argues there’s a sweet spot for tax rates. Raising taxes increases revenue up to a point—when it ultimately becomes counterproductive, and collections actually drop.

Critics dismiss this as a theory (which it is), but examples are everywhere.

Take Norway: They bumped their wealth tax up 1.1%, expecting an extra $146 million in tax revenue. Instead, they lost $448 million per year as wealthy residents packed their bags and took their money with them.

Why? Because high taxes push people to adapt. Entrepreneurs and investors can—and will—move their money to friendlier tax regimes, taking their job creation and capital with them.

It’s not just Norway. In 1990, 12 OECD (Organization for Economic Cooperation and Development) countries had wealth taxes. Today, only four do.

The OECD reported that these taxes failed their redistribution goals and led to “undesired emigration.” Who could have guessed…

And it’s not just about taxing individuals either.

Before 2017, the U.S. had one of the world’s highest corporate tax rates, leading multinational companies to stash earnings overseas. When the corporate tax rate dropped from 35% to 21%, we saw a record inflow of cash.

That meant more tax revenue, record profits, higher stock prices (hello, capital gains taxes), and bigger dividends (hello again, taxes). In this case, lowering tax rates actually brought in more revenue.

Now, consider last year’s $1.83 trillion deficit.

Even if the U.S. maxed out tax receipts as a share of GDP, we’d only eliminate about half the deficit. In other words, even at peak taxation and assuming zero productivity loss, we would still have a problem on our hands.

STOCKS
5. Guess Today’s Mystery Stock 🕵️‍♂️

With a visionary at the helm and ambitious goals in sight, this company has a knack for making headlines. Think you can crack the mystery?

1. This “Magnificent 7” stock surged 22% after its Q3 report. Despite missing on revenue, the company boosted profit margins, beat earnings, and delivered a sunny 2025 outlook.

2. The CEO is never far from controversy. Whether it's political tweets or bold claims about transforming industries, he keeps investors—and regulators—on their toes.

3. Positioning itself as an AI leader, the company is making big bets on self-driving tech and even humanoid robots.

4. The company’s fastest-growing segment is energy storage, particularly its Megapack batteries that help stabilize power grids. Analysts believe this could eventually surpass the core auto business.

5. The stock trades at a lofty 60x earnings—well above rivals at 5-10x. Investors justify this premium by viewing it as more of a tech play than an industrial one.

Got a guess? Tap here to reveal the answer → 

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