GRANTHAM'S MARKET FORECAST: International Stocks Fine, US Stocks And Bonds Horrible, Trees Good

GMO has released its latest 7-year asset class forecasts (based on prices on January 31).

The forecasts are average annual returns over 7 years based on current prices relative to cyclically adjusted earnings, return on equity, and other measures. The expected returns are “real” (adjusted for inflation, which is presumed to be 2.5%). In the past, GMO’s forecasts have often been very accurate.

The bottom line:

  • US stocks will have crappy returns, especially small stocks, with one exception…
  • US “high-quality” stocks (high cash flow, low debt) will do fine (just below average)
  • International stocks will have fine returns (just below average)
  • Bonds and cash will have horrible returns across the board
  • Trees (timber) will have their usual impressive returns
GMO Market Forecast

Photo: GMO

NOW WATCH: Money & Markets videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.