The Day After the Day After Tomorrow
There are very few market commentators whose words I parse as closely and respectfully as GMO's Jeremy Grantham. Besides being the featured interviewee in this past week's edition of Barron's, his quarterly letter was just posted. He succinctly lays out his own golden rules for successful investing in the years ahead and discusses the current valuations assigned to various investment categories used by his asset allocation group. On all counts I concur with his views.
Not surprisingly, GMO currently assigns very poor expected returns for fixed income securities, especially long-term US government bonds, in the years ahead. Based on the historical precedence of equities to perform well in most environments over longer-term time horizons, especially in periods of rising inflation, GMO favors equities to bonds. It sees most of the global equity markets as fairly valued, with the exception of US stocks ex-high quality, which they deemed very overvalued. Below is an illustration of the recent performance of the equal-weighted S&P 500 ETF (RSP) to the iShares S&P 500 Value Fund (IVE) since the market peak in 2007....480 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.
Already a Subscriber? Please login.