Courtesy of Mish.
Value investor Grantham, Mayo, Van Otterloo (GMO) now estimates US stocks are poised for annualized losses for the next seven years.
*The chart represents real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward-looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward-looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward-looking statements. US inflation is assumed to mean revert to long-term inflation of 2.2% over 15 year.
A year ago the chart looked like this.
Charts from GMO Asset Class Forecasts.
Reflections on Extreme Valuations
Was GMO wrong last year? Of course not. Expected returns are just that. Extreme valuations can always become even more extreme (and they did).
My Thoughts:
During periods of market excess, avoiding bubbles and instead investing in out of favor but attractive assets can be quite painful to live through in the short-term. But those who remain disciplined and on the right side of the somber judgment eventually get rewarded with significant gains amid widespread losses for those favoring that which has been working well during the period of excess.
GMO 10-Year History
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