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Latest GMO 7-Year Forecast May 31, 2021


Some quotes from GMO's Peter Chappinelli:
Many have wondered aloud whether GMO is not giving enough credit to some of these high growth new-business-model “disruptors.” First, we have all sorts of models that take current optimistic growth forecasts into account. Many are deserving of their current high multiples --- we absolutely concede that somewhere in the Global Growth basket sits “the next Amazon.” Unfortunately, they’re ALL being priced that way, and that is a bridge too far.
We also remind ourselves that during the month of May, the S&P 500’s real earnings yield (the inverse of P/E minus inflation) dipped into negative territory, the lowest in 40 years. Even at the height of tech bubble mania this scary event did not occur.
Combine that sober statistic with the negative real yields being offered by sovereign bonds, and you may come to see why we are loathe to recommend a traditional 60/40 mix. There will come a day when global equities and government bonds are fairly valued and should deliver a “normal” real rate of return. Today, however, is not that day.


  • Hey Lewis. You wonder. Reminds me of Robert Kessler recent talk on wealth track. Cash is NOT trash. I remember seeing him maybe 40 years ago on a TV investment show stating to buy 30 year zeros. That's when I was a young buck watching TV after working at the local Texaco.

    So who knows like I said prior, I have no idea if the fool is the person in or out of the market at this time. I'm certain there's a fool on one side of that equation though

    I'm thinking there is no way fed can pull back on the reins... market would go splat

    Best regards

    Baseball Fan

  • edited June 2021

    The above is a 7 year forecast by GMO from 12/31/2010. I have posted right after the above prediction that GMO would be very wrong about US LC(SPY), and they were hugely wrong. I haven't changed my mind about GMO. I said the same about Arnott (PAUIX) in 2010.

    Models are nice, the real world works differently.

    For me, cash was always trash. My bond funds made a lot more than cash. I have never had cash and even now as a retiree I don't believe in a lot of cash for long term hold.
    IMO, a retiree needs maybe 3-6 months at most in cash. Most/all retirees have a cash flow (from SS + distribution + pension + can sell something, what is so difficult to sell 3-4 times per year), in good timed they can sell stocks and in bad times they can sell some bonds. Some of these bonds should be a ballast for stocks which means in market meltdown they will go up or have minimal losses.
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