Thursday, September 24, 2009

Jeremy Grantham: "GMO’s 7-Year Asset Class Return Forecast"

From Trader's Narrative:

...Grantham is a long term market timer. He’s not interested in catching short term fluctuations nor would he be able to exploit them since he manages billions in assets as an institutional money manager. With that in mind, here is a chart - released today - of GMO’s most recent 7 year asset class return forecast:

GMO 7 year asset class forecast Sept 2009

Check the free trading resource section for a full size copy (in PDF format). Look in the Reports & Articles folder - files: “GMO 7Yr Forecast”.

To sum up, their predict that:

  • the S&P 500 will return less than 5% annually over the next 7 years.
  • international equities are expected to perform better, but not by that much
  • US government bonds are among the lowest return asset class (1.7%)
  • once again, timber makes an appearance with a 7.5% expected return

In comparison, GMO’s prediction of asset class returns just before the financial markets went into a tailspin in 2007 looked quite different:

  • the S&P 500 forecast was -2%
  • US ‘low quality’stocks were expected to return -10%
  • US government bond returns were forecast at just 3%
  • and timber was still high, at 6.5% annual return...MORE
Here's the larger version of the chart