- "Our problem is that the S&P is up this year about 25% on earnings that are up 3%. So we've got a market that is rising because of P/E expansion," 21-year GMO veteran Ben Inker tells Barron's (one recalls a similar warning from Guggenheim back in August).
- Inker argues that because P/E multiples are still expanding at a time when profit margins are "already as good as we've ever seen," the prospects for upside surprises to profit growth look "pretty dim" going forward.
- As for bonds, Inker characterizes the return on U.S. government debt as "horrible" and says corporate debt "is riskier than people are making it out to be, particularly the very low-rated stuff."
- Inker's picks for the current environment: TIPS, "high-quality" U.S. companies, and emerging-market stocks where reasonable valuations leave room for some upside.
- "High-quality" U.S. stocks mentioned include: JNJ, MCD, WMT, MSFT
- TIPS ETFs: TIP, VTIP, IPE, SCHP, LTPZ, STPZ, TIPZ, STIP, TPS, TDTT, TDTF, TIPX
- EM ETFs: EEM, VWO, EDC, EDZ, SCHE, IEMG, EEV, PIE, ADRE, EUM, EET, GMM, EEME, EMCR, DBEM, EWEM, FEM, EMLB, EMSA, EMFT, EMDR
- High-yield ETFs: HYG, JNK, HYS, HYLD, SJNK, PHB, SJB, ANGL, XOVR, UJB, QLTC