Grantham: Expect 11% Annual Return from Quality U.S. Equities, Outperformance from Emerging Market Bonds

In the latest 7-Year Asset Class Forecast from Jeremy Grantham and GMO (published 9/23/09), the firm anticipates a 11.8% annual return from U.S. 'high quality' equities with active management, and for emerging market bonds to outperform in a significant way. Click to enlarge:

Comments

[Vaun:]

That's rather misleading... saying the "best" of the US market has a 90% probability of a real return between 4 and 16% according to your metrics and assumptions is a far less powerful headline. If anything could be gleaned from this - the numbers say that you should be invested internationally.

Sep 24 11:12 AM

[chap08:]

Forget the 11%, the "high quality" and the "value added", what Grantham is telling you is:

1. US equities will do far worse than their historical record.
2. US bonds are even worse.
3. Although their returns are not great, after 7 years, your international stocks will be worth about 25% more than your US stocks.

Sep 24 11:45 AM

[Graham and ...:]

The author may be right. But he is basically calling for a Nifty-Fifty 1972 type market. And we all know what happened shortly thereafter.

Sep 24 02:55 PM

[Ricard:]

There is nothing new here. Grantham has been predisposed to 'high quality blue chip US stocks' for nearly a year now. Exactly what is a 'high quality blue chip US stocks' he has left up to your imagination. He has also been consistently bullish on emerging equities, and consistently bearish on Chinese equities in particular for some reason that even he can't explain.

I am waiting for his next newsletter, coming out probably late October.

Sep 25 12:08 AM

[p church:]

I gather:

1) For the majority of sectors, do not buy and hold
2) Stay away from longer term treasuries
3) Alternative Investments a key sector

Sep 25 08:23 AM

[richjoy403:]

SA...What is going on here?...SA lists a bunch of symbols that are not mentioned in their (extremely brief) article on Grantham -- thus not either recommended or panned by him.

Sep 25 12:07 PM

[bsharvy:]

Does he provide any criteria for identifying "high quality" equities? He distinguishes it from large-cap....

Sep 25 01:11 PM

[Old Trader:]

bsharvy,

I obviously can't speak for Mr. Grantham, but to my way of thinking a "high quality" equity, would be a large, to very large company with at least a decent amount of international sales and a solid balance sheet in a growing, or at the least, "stable" industry.

Sep 25 06:57 PM