The folks up at GMO (legendary investor Jeremy Grantham’s shop) have published their latest asset-class forecasts.
The news is not good for those who own U.S. stocks.
The stock market has run so far so fast that GMO’s valuation analysis, which assumes that today’s super-high corporate profit margins will eventually regress to their means, predicts that inflation adjusted returns for U.S. stocks will be negative over the next 7 years. (Except for “high-quality” stocks–low debt, high cash flow).
International stocks will do better but still badly, GMO predicts.
The only opportunity for an average equity return–about 6.5% per year–will come in emerging markets, which have been demolished lately. (The lower the price goes, the better the future return is projected to be).
Bonds aren’t much better, though. Neither is cash.
The only asset class that GMO expects to deliver compelling returns other than emerging-market stocks is… timber. So if you’re dying to invest in something, maybe go out and buy some trees.