Goldman Sachs is telling its wealthy clients not to expect 2019's blowout returns again this year.
The firm's private bank, which manages about $1.5 trillion in assets, estimates U.S. equities will gain about 6% in 2020, a modest return after 2019's near 30% rally.
"Strong erstwhile returns have borrowed from future gains," Sharmin Mossavar-Rahmani, Goldman Sachs Investment Strategy Group CIO, said in the group's 2020 outlook.
Goldman's base case estimates the S&P 500 will return 6% in 2020, with a 55% probability. In its good case, the index will return 12%, with a 25% probability.
The S&P 500 returned a whopping 30% in 2019, helped by the Federal Reserve's three rate cuts to spur economic growth. Plus, a "phase one" trade deal between the U.S. and China and lower risks of a disorderly Brexit boosted investor sentiment. Alongside equities, corporate bonds, government bonds and commodities such as gold and oil all advanced last year.
"The magnitude of this gain was second only to its persistence," Goldman's note said, adding that the S&P 500 rose on nearly 60% of last year's trading days.
While Goldman anticipates modest gains this year, it is still recommending clients keep their money in the market.
"Given our view of a low probability of recession ... the economic and policy backdrop favors staying invested,' said Mossavar-Rahmani.
Historically, when the S&P 500 has returned 30% on a rolling 12-month basis — as it did in 2019 — the next year's returns average 10.4%, with a positive price return 85% of the time. This average is higher than the average yearly return of the market in the post-WWII period, Goldman notes.
This data "illustrates the value of the momentum factor widely used in investing," Mossavar-Rahmani added.
Further, the probability of a positive one-year return in U.S. equities in an economic expansion is 87%, Goldman noted.
— with reporting from CNBC's Nate Rattner.