GMO 7-Year Asset Class Forecasts - October 2012

GMO has released its monthly 7-year Asset Class Forecasts and since many markets have been pretty stable all year, the story remains more or less the same:

• US Large caps: 0.3% per year
• US Small caps: -0.2% per year
• US High Quality: 4.8% per year
• International Large caps: 4.8% per year
• International Small caps: 4.2% per year
• Emerging Markets: 6.3% per year

Avoid US stocks, except high quality, and emerging market stocks should offer the best returns. Obviously, all emerging markets are not created equal. The Chinese stock market which is very depressed is likely to return more than the Thai and Indonesian stock market for example, which seem really resilient at the moment with relatively high valuations.Most bonds, excluding Emerging debt, are still a terrible investment for the next few years according to GMO methology.

You can receive GMO's forecasts (monthly) and the quarterly newsletter for free by registering at http://www.gmo.com