"A challenging May for many asset classes resulted in significantly increased forecasts, though equities outside the U.S. continue to offer more favorable risk premiums,” said Catherine LeGraw from GMO’s Asset Allocation team.

“The dispersion within equities is particularly interesting as the valuation gap between U.S. and international equities is closest to the widest it has ever been, and we are also seeing wide spreads between value and growth. We have not seen value trade so cheaply on a broad level across equity markets since the 2000s,” LeGraw continued.

“We continue to favor emerging markets equities, particularly emerging market value, and see some appeal in international value stocks. In the U.S., small-cap value is a pocket that has become quite attractive to us.”


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