No. of Recommendations: 6
A few years ago, I took a look at how well GMO's asset forecasts predicted asset returns 7 years later. I was looking at more recent results than 2000, but came away rather disheartened.
I just sought out one from ~7 years ago and came across the one below dated Jan 2017. It predicted US stocks return around -3%/yr for the 7 years ending Jan 2024 (-20% ROI) and the best performing asset class to be emerging markets at +4%/yr (+32% ROI).
GMO forecast from 2017:
https://theotrade.com/wp-content/uploads/2017/02/g...And the one below from 7 years prior in 2010 also seemed to miss the mark significantly, forecasting negative US market returns for small/large caps by 2017. Emerging markets forecast was 4.7%/yr or 31% ROI which was also majorly off, at least as measured by EEM.
GMO forecast from 2010:
https://www.mymoneyblog.com/images/1005/gmo1.gifJim, do you still have confidence in GMO's approach despite its fairly dismal track record over the last ~15 years? Is it your opinion that the underlying basis for their estimate methodology is sound, and that it's likely to return to being a decent predictor of medium-long term returns again if valuation multiples someday stop their seemingly endless expansion?
I should add, this "going off the rails" with the forecasts doesn't seem to be unique to GMO's. I believe Vanguard's, SSGA's, and Aimco's similar long term forecasts also missed the market in recent years. AS one example, I recall all were very optimistic about international/emerging, but none of that optimism has come to fruition.
