As anyone who has followed GMO’s Jeremy Grantham over the years will know, it has been a long, long time since GMO’s equity return forecasts have called for anything approaching a reasonable return.
Well, we are happy to report that, by September 30, that had changed (and most equity markets are now significantly lower than they were at the end of the month).
In the first chart below, the solid bars show GMO’s expected annual real return for various asset classes over the next 7 years. US “high quality” stocks are now expected to return better than 7% real, which is actually higher than the long-term average. International stocks, meanwhile, are close to their long term average of 6% or so–especially emerging markets.
The second chart (below) breaks this expecter performance down into more detail (value vs. growth). Again, the returns look weak for general large cap US stocks (3% real) but strong for high-quality, international, and emerging.
See Also: Goldman: S&P 500 Now Undervalued