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.
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.