GMO Conference | November 01, 2022

Inflation, Rates, and Recession Risks

Now Is Not the Time to Do Nothing

Market uncertainty is high, but we believe now is not the time to stand still.

2022 has witnessed the highest inflation since the 1970s and rising rates for the first time in years, causing turbulent markets, a risk of recession, and unease among investors. GMO professionals discussed these challenges at our Fall Conference and highlighted several ways to navigate the current market environment.

Explore our content below and Contact Us or your GMO representative for more information. Intended for accredited investors.


Featured Session:

Allocating Amidst Discomfort

As equity markets have declined over the course of 2022, GMO has seen interesting and attractive opportunities arise. John Thorndike, Co-Head of Asset Allocation, shared his thoughts on where to allocate capital in the current market environment. He sees improved valuations around the globe, particularly in certain equity markets, such as Value in Europe, EM, and Japan, as well as in Corporate, EM, and Structured credit.

John also explained why currency valuations matter for future equity returns, which is especially important today given the incredible strengthening of the U.S. dollar this year.

Finally, he stress-tested GMO’s attractive European Value stock forecast, concluding that even if European fundamentals disappoint and suffer due to an energy crisis this winter, current valuations offer such a wide margin of safety that the asset class is still more attractive that the broad U.S. equity market.

Read related research: 2Q GMO Quarterly Letter


Inflation Fairy Tales and Other Nightmares

As global economies struggle with inflation and its ramifications, it is worth revisiting its core drivers to gauge whether it stands to be a long- or short-term problem. Based on analysis of goods and services spending patterns and wage growth moderation trends, James Montier does not think that persistent inflation should be investors’ biggest worry today (he thinks recession should be). However, all investors still must consider inflation, and investing in Value remains the most attractive way to protect portfolios from it.


Goodbye Goldilocks: The Global Economy Enters Difficult Times

Jeremy Grantham sat down for a conversation with Andy Golden, President of PRINCO. The two investment experts shared a discussion ranging from the ongoing U.S. superbubble and the prospect of recession to climate change progress and continued risks and the long-term corrosive effects of inequality.

Read Jeremy's latest paper Entering the Supperbubble's Final Act


Macro Matters: Inflation, Interest Rates, and the GMO Forecasts

GMO’s 7-Year Asset Class Forecasts are highly dependent on the equilibrium state. Catherine LeGraw and John Pease, members of our Asset Allocation team, described three potential equilibrium states of valuation and how GMO incorporates inflation, the labor market, and economic activity into our assessments.


The (AI)Mighty Dollar – Is It a Problem for Emerging Debt, or an Opportunity?

A consequence of rising rates, the recent strength of the U.S. dollar places stress on emerging countries through both direct and indirect channels. Emerging debt investors Victoria Courmes and Carl Ross unpack the risks and opportunities within emerging debt markets arising from the strength of the U.S. dollar.

Register for full access to GMO's Research

Please enter a valid email address

Please enter First Name

Please enter Last Name

Please enter Company

Investor Type Required

Country Required

State is required

* Indicates required field

GMO Presenters

Victoria Courmes

Victoria Courmes

Portfolio Manager

Ms. Courmes is engaged in portfolio management and research for GMO’s Emerging Country Debt team. She is primarily responsible for the team’s local currency debt portfolio and is also the team’s lead liaising with the Developed Rates & FX team’s quantitative researchers on currency and interest-rate strategies. Prior to joining GMO full-time in 2016, she worked at Acadian Asset Management as an Associate Portfolio Manager in Emerging Markets Local Bond Funds. Previously, she worked at Lord Abbett as an International Economist and Currency/ Local Rates Strategist. Ms. Courmes earned her bachelor's degree in Political Science from Barry University and her MA in International Relations from the School of Advanced International Studies at John Hopkins University.

Jeremy Grantham

Jeremy Grantham

Long-Term Investment Strategist, Co-Founder

Mr. Grantham co-founded GMO in 1977 and is a member of GMO’s Asset Allocation team, serving as the firm’s long-term investment strategist. He is a member of the GMO Board of Directors, a partner of the firm, and has also served on the investment boards of several non-profit organizations. Prior to GMO’s founding, Mr. Grantham was co-founder of Batterymarch Financial Management in 1969 where he recommended commercial indexing in 1971, one of several claims to being first. He began his investment career as an economist with Royal Dutch Shell. Mr. Grantham earned his undergraduate degree from the University of Sheffield (U.K.) and an MBA from Harvard Business School. He is a member of the Academy of Arts and Sciences, holds a CBE from the UK and is a recipient of the Carnegie Medal for Philanthropy.

LeGraw_Catherine

Catherine LeGraw

Asset Allocation

Ms. LeGraw is a member of GMO’s Asset Allocation team and a partner of the firm. Prior to joining GMO in 2013, she worked as a director at BlackRock. Previously, Ms. LeGraw was an analyst at Bear, Stearns & Co. She received her BA and her BS in Economics from the University of Pennsylvania. She is a CFA charterholder.

Montier_James

James Montier

Asset Allocation

Mr. Montier is a Senior Advisor to GMO, consulting on economic and market research. Prior to joining GMO in 2009, he was co-head of Global Strategy at Société Générale. Mr. Montier is the author of several books including “Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance”; “Value Investing: Tools and Techniques for Intelligent Investment”; and “The Little Book of Behavioural Investing.” Mr. Montier is a visiting fellow at the University of Durham and a fellow of the Royal Society of Arts. He holds a BA in Economics from Portsmouth University and an MSc in Economics from Warwick University.

Pease_John

John Pease

Asset Allocation

Mr. Pease is a member of GMO’s Asset Allocation team. Prior to joining GMO full-time in 2016, he was an intern with the Asset Allocation team. Mr. Pease earned his Bachelor of Science in Economics and his Master of Science in Economics from Pontificia Universidade Catolica do Rio de Janeiro.

Ross_Carl

Carl Ross

Emerging Country Debt

Dr. Ross is engaged in research for GMO’s Emerging Country Debt team and a partner of the firm. He leads the team’s research in fundamental sovereign credit, with a primary emphasis on Asia, Emerging Europe, Middle East, and Africa. Prior to joining GMO in 2014, he was a managing director at Oppenheimer & Co. Inc. where he covered emerging debt markets. Previously, he was the Senior Managing Director and Head of Emerging Markets Fixed Income Research at Bear Stearns & Co. Dr. Ross earned his bachelor's degree in Economics from Mount Allison University, as well as his MA and PhD in Economics from Georgetown University.

Thorndike_John

John Thorndike

Co-Head of Asset Allocation

Mr. Thorndike is co-head of GMO’s Asset Allocation team and a partner of the firm. Mr. Thorndike currently oversees asset selection and portfolio construction decisions, as well as team management responsibilities. Prior to joining GMO in 2015, he was a managing director and Deputy CIO at The Investment Fund for Foundations. Previously, he was an analyst with TIFF. Mr. Thorndike earned his bachelor's degree in Physics from Bowdoin College.

Related Reading

Read More GMO Research