GMO 7-Year Asset Class Forecast: 4Q 2020

Catherine LeGraw from GMO’s Asset Allocation team offers the following comments about the updated forecasts:

“Coming off the worst year ever for value stocks relative to their growth counterparts in 2020, we see the relative valuation spread between the two as the best opportunity available to investors. This is against the backdrop of a bleak outlook with negative forecasted real returns across most major asset classes.”

“At year end, the valuation disparity means value stocks are priced to deliver 11% more than growth stocks in the U.S. and EM and 7% more than growth stocks in ex-U.S. developed markets. GMO has invested in this opportunity set by focusing on attractively priced value stocks like EM value, and launching an Equity Dislocation strategy in Q4 that seeks to exploit extreme dislocation between value and growth stocks.”

As of December 31, 2020

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Source: GMO
The chart represents local, real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward-looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward-looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forwardlooking statements. U.S. inflation is assumed to mean revert to long-term inflation of 2.2% over 15 years.
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