GMO 7-Year Asset Class Forecasts: Value vs. growth is coming off its worst year ever.

While real return forecasts for broader markets are not particularly promising, there are some pockets that look more attractive than others. As GMO put it in the firm's recent Quarterly Letter, "Value is cheap, no matter where you look."

We believe this is the best opportunity set we’ve seen since 1999 in terms of looking as different as possible from a traditional benchmarked portfolio.

The GMO Asset Allocation Team has released its latest 7-Year Asset Class Forecast through July 2020.

The GMO Asset Allocation team has released its latest 7-Year Asset Class Real Return Forecasts through the first quarter of 2020.

The GMO Asset Allocation team has released its latest 7-Year Asset Class Real Return Forecasts

“GMO’s 7-Year Asset Class Forecasts for both stocks and bonds have generally declined in 2019, predominantly due to strong appreciation in asset prices,” said Rick Friedman from GMO’s Asset Allocation team.

Our forecasts have come down due to the extraordinary performance of equities and credit in the first quarter. However, we continue to find pockets of opportunity across equities: we believe value stocks are trading at attractive levels globally, and emerging markets value stocks are priced to deliver more than 7% above inflation.

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. 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%.