The GMO Asset Allocation team has released its latest 7-Year Asset Class Forecasts.
Most global equity markets declined in the first quarter despite the corporate sector generally reporting reasonable fundamental data. As a result, GMO's 7-year equity forecasts mostly improved over the first quarter (see chart below). Even with these improvements, International and U.S. equities are still forecast to have flat to negative real returns over the next 7 years, with Emerging equities remaining an exception, forecast to have a positive real return of 1.9%.
"To us, the opportunity set for equity investors looks pretty clear: favor non-U.S. markets, especially value stocks in emerging markets," says GMO Asset Allocation team member John Thorndike. "Additionally, with the Fed continuing to raise short-term interest rates and the potential inflationary effects of tariffs and trade wars, we think investors are well served to keep their duration short."
*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 forward‐looking statements. U.S. inflation is assumed to mean revert to long‐term inflation of 2.2% over 15 years.
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