Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this [bull market] event will be recorded as one of the great bubbles of financial history, right along with the South Sea bubble, 1929, and 2000.

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."

With a COVID-19 vaccine rolling out and markets enjoying a post-election relief rally, credit investors may be asking “is there any opportunity left?”

GMO’s new quarterly letter to clients examines the worst 12-month performance for value stocks in history and explores how investors can profit from a period reminiscent of previous bubbles in global markets.

History does not repeat, but it rhymes, as Mark Twain observed. As such, we are struck by the eerie and dangerous parallels between today’s markets and the markets back in 1999. Back then, Value investing and Value managers were under the gun for having underperformed their Growth brethren for too long.

In a new piece – “Covid-19, Climate Change, And The Need For A New Marshall Plan” – GMO’s Jeremy Grantham discusses the impact of Covid-19 on the economy of the developed world, arguing great strides are necessary in order for the U.S. and the world to accelerate growth.

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.

In a new white paper, Mustafa Ulukan and Sergey Sobolev from GMO’s Emerging Country Debt Team examine the notable rise of State-owned Enterprises (SOEs) in international capital markets since the Global Financial Crisis.

In a new quarterly letter to GMO clients, head of asset allocation Ben Inker highlights the sea change in the utility of government bonds and Matt Kadnar, member of GMO’s Asset Allocation team, weighs in on today’s low bond yields.

Emerging countries have been in the midst of a crisis that is not of their own making. A great majority of these countries are navigating the crisis fairly well.

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

Never before have I seen a market so highly valued in the face of overwhelming uncertainty. Yet today the U.S. stock market stands at nosebleed-inducing levels of multiple, whilst the fundamentals seem more uncertain than ever before. It appears as though the U.S. stock market has drunk from Dr. Pangloss’ Kool-Aid – where everything is for the best in the best of all possible worlds.

In a new white paper, the GMO Emerging Markets Equity Team argues that Emerging Markets in aggregate are more resilient today than in prior periods, an important consideration as investors evaluate the rebound the asset class has experienced since late March.

The pandemic has created an extraordinary risk/return trade-off for the shares of high quality U.S. banks. We believe there is the potential for decent returns for bank investors without improvement in the current environment, and the potential for enormous returns if the rate of change in the economy remains positive.

In a new quarterly letter to GMO clients, Ben Inker, head of asset allocation discusses the current uncertainty over the market and economic outlook and the decision to significantly reduce net equity exposure in the GMO Benchmark-Free Asset Allocation Strategy. Alongside Inker’s letter, Jeremy Grantham writes in “The Virus, The Economy and The Market” ...

In a new white paper, GMO Credit Opportunities Strategy co-PM Jeff Friedman looks at the Federal Reserve’s unprecedented actions in the corporate credit market amid the COVID-19 pandemic and highlights an area of the market where investors might capture attractive opportunities.

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

In a new white paper from GMO’s Emerging Markets Equity Team, Amit Bhartia, Tiger Tong and Uday Tharar examine vulnerabilities and opportunities in emerging markets as the COVID-19 pandemic continues to threaten lives and economies around the world.

In a new white paper from GMO’s Asset Allocation team -- "It's Always Darkest Before the Dawn" -- Ben Inker, Catherine LeGraw, John Pease and John Thorndike examine the three phases of bear markets against the backdrop of the current market environment.

Jon Roiter reflects on a wild ride in the high-yield credit market and whether now is the time to capitalize on attractive investments in the space.

While it is, of course, a cliché to say that markets are driven by fear and greed, like many clichés this one contains a strong element of truth. The bad news for us humans is that within our brains, emotion appears to have primacy over cognitive function. While this may well have kept us alive and allowed our species to thrive, this uncomplicated hierarchy doesn’t necessarily work in our favour when it comes to thinking about financial markets.

GMO’s Ben Inker discusses the recent turmoil in financial markets and the firm’s perspective on valuations amid the sharp declines in many asset classes.

The conventional 60/40 portfolio of today is not going to generate the kind of returns that investors say they need. Investors must seek to embrace the terrifying concept of being different. As the ghosts of many great investors past have amply demonstrated, being different is the path to investment success. However, such advice falls into the simple but not easy category, to borrow Warren Buffett’s expression.

While the passive balanced portfolio (60% stock/40% bond) has outperformed more diversified allocations over the last decade, we believe investors should temper their expectations for a repeat. Two key problems lie ahead for such a portfolio.

Our forecasts for stocks generally improved in January as stocks declined, but they fell for bonds as rates rallied. Coronavirus and growth fears weighed on markets, pushing Value and non-U.S. stocks down most.

In today’s society people are choosing to have fewer children, and delaying having children at all into later, less fertile years. These two factors have driven fertility rates below replacement level in most of the world, but a crucial third factor gets little attention and is having a profound impact on fertility: toxicity. The economic and social ramifications will be severe.

By moving our USD emerging debt strategy benchmark to the diversified (issuer-capped) version of J.P. Morgan’s EMBIG benchmark, we will limit our exposure to the ballooning issuance of low-return-potential, opaque countries. Our objective is to retain the “high dividend sovereign equity” nature of this asset class for our investors...

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

Emerging market value stocks are the most attractive asset class for two reasons, explains GMO's John Thorndike.

The policy proposal of "Medicare for All" calls for nationalizing the U.S. health insurance system. While this is a politically unlikely outcome, the stock prices of the private sector Managed Care insurance companies have suffered as rhetoric heats up.

ESG integration is best used as a tool to improve portfolio returns and/or reduce risk. While usually thought of as a company-level concern, material ESG data can be very useful at the country level as well, especially in emerging markets. ESG signals are only as good as the quality of their inputs.

In a new GMO Insights piece titled “Emerging Market Stocks: Getting Comfortable with the Uncomfortable,” asset allocation team member Rick Friedman looks at how lackluster emerging market equity returns in recent years have led many investors to write off the asset class, but GMO “humbly suggest(s) investors get more comfortable owning the uncomfortable.”

The years leading up to the 2000 stock market bubble were extraordinary and unprecedented. They caused unique pain to the portfolios of valuation-driven investors. The valuation extremes, though, created the greatest opportunity set for valuation-driven investors since the Great Depression.

Ben Inker highlights the multiple benefits large U.S. companies enjoy when compared with smaller ones, and examines whether the conditions that have caused this situation will remain in place.

“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.

Investors who have watched the U.S. stock market over the last decade might be wondering whether the appeal of value stocks has been whittled away by a long run of underperformance.

Small cap stocks within emerging markets have outperformed large cap stocks by around 0.5% annualized since January 2000,” George writes. “However, illiquid stocks (regardless of capitalization) have outperformed large cap stocks by around 3%. This illiquidity premium is related to, but not the same as, the small cap premium.

Game theory is a useful framework for modeling aspects of sovereign debt recoveries, given that it models the interactions among debtors and creditors in the lending/borrowing "game." While there is a long-established set of precedents for Paris Club (U.S. & European) and multilateral (IMF, etc) creditors’ actions, we still have little available information about how China will act in debt negotiations.

Shares in Alphabet have come under a good deal of pressure over the last year as investors process the implications of increasing regulatory scrutiny, culminating in reports this month that the U.S. Department of Justice (DOJ) is preparing for an antitrust probe into big tech.

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.

The duration and magnitude of value’s recent underperformance has caused many to ask once again if value investing is no longer effective. While it is possible that secular shifts have helped to compress value’s premium relative to its long-term history, we believe most of the recent decline can be traced to more transitory factors.

Investors have a tendency to obsess about their investment portfolios. On the surface, this is a perfectly reasonable focus given results in the portfolio are a crucial determinant of success for whatever purpose the portfolio is there to serve.

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.

Lucas White and Jeremy Grantham examine the benefits of investing in a climate change strategy, including diversification, protection from climate risk, inflation protection and the ability to invest in growth-oriented companies at a discount.

In a new Viewpoints piece on GMO's website, James Montier examines Modern Monetary Theory (MMT) and the negative view on it taken by many highly-regarded economists.

On January 31, 2019, J.P. Morgan, which manages the EMBI suite of emerging market bond indices, added five new countries of the Gulf Cooperation Council (GCC)1 to the external debt benchmarks. This addition represents the largest ever one-time adjustment to the index that our foreign currency sovereign debt funds have historically used as a benchmark.

In a new white paper on GMO’s website -- “Total Factor Productivity Growth = Totally Fictitious Pretentious Garbage” -- James Montier and Philip Pilkington take aim at the argument that stagnating incomes are to be blamed on poor productivity growth.

In a new quarterly letter to GMO’s clients, head of asset allocation Ben Inker looks back on a confounding 2018 and discusses how to assemble a portfolio of attractive assets looking ahead.

GMO's Martin Tarlie argues in a new white paper that the U.S. stock market was a bubble from early 2017 through much of 2018, and that the bubble started to deflate in Q4 2018, despite strong fundamentals.

Steep declines across most asset classes in the second half of 2018 resulted in significant increases in forward-looking returns.