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GMO Quarterly Letter

edited January 2019 in Off-Topic
In general, it looks to be the best opportunity set we have seen since 2009. This means it is reasonably straightforward to put together a diversified portfolio priced to achieve something close to +5% real return. But as U.S. equities and nominal government bonds are not among the appealing assets, we believe the portfolio you should own today looks more or less nothing like a traditional 60% stock/40% bond portfolio.
...non-U.S. developed equities are a good deal better than cash, and emerging equities even better, at about fair value versus history. We believe combining those reasonable valuations with value spreads much wider than average means there is suddenly a fairly wide array of cheap stocks to buy. The attractiveness of credit is also on the rise, with emerging debt looking a bit cheap on our data and U.S. corporate high yield at approximately fair value as of yearend.
Alts look attractive relative to developed equity markets.....With the rise in cash rates to the point where cash now may provide a positive real return, we think alternatives broadly have the potential to deliver 2.5–3% real returns for investors.


  • Seems more and more commentators are urging increased exposure to EMs. Why does the skeptic in me wonder if this is a contrary signal.
  • edited January 2019
    Best buying opportunity since 2009? (Give me a break!) To their credit, GMO does some in depth analysis. Hard for me to disagree with their preference for international.

    I think having this market positive thread running concurrently with JohnN’s gloom & doom one provides some nice comtrast and room for discussion. Unfortunately, John’s ends with the headline. Little real analysis of equity markets. Just a pitch for gold.
  • went into EM mostly with EMQQ
  • This probably the right move for five year money but there may be a lot of pain before then. If the developed world tanks, nothing will save EM, and cheap stocks will get a lot cheaper. Cheap does not equal safe
  • I did move out of a tech ETF and opened a position in PRIJX. My other EM exposure is mainly through Grandeur Peak.
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