Barry Ritholtz Comments on Jeremy Grantham’s Expected Returns
Ritholtz mentioned Grantham’s fine long-term track record at predicting asset class returns, while cautioning GMO can be early. With this in mind, Ritholtz indicated he was overweight emerging markets which have been out of favor recently.
GMO expects annual returns of 6.8% for emerging markets; far exceeding the other asset classes highlighted.
Ritholtz considered U. S. stocks, despite a huge run of outperformance, as fairly valued.
SMA Comment: Grantham has indeed had previous success at forecasting asset class returns. GMO’s 10-year forecast for 11 asset classes from December 31, 2001 compared to the actual ranking of returns 10 years later showed a stunningly accurate 94.5% correlation to their projection [link].