GMO Fall Conference | November 01, 2022

The U.S. Superbubble

End of the Growth Cycle

The 2022 bear market has marked the end of the super-growth cycle.

The U.S. Superbubble, as Jeremy Grantham has termed it, featured the most dangerous mix of factors in modern times at the end of last year: all three major asset classes – housing, stocks, and bonds – were critically historically overvalued. And all have retracted in 2022. Perhaps the most pertinent question we sought to answer for our clients at GMO’s Fall Conference was: what actions should investors take during the deflating superbubble?

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


Featured Session:

Value’s Attractiveness: How Has It Evolved and How Much Is Left?

Two years ago at GMO’s 2020 Fall Conference, we first highlighted the extraordinary valuation spread between cheap Value and expensive Growth stocks and launched GMO’s Equity Dislocation Strategy to take advantage of this historic opportunity.

At this year’s Fall Conference, Equity Dislocation Portfolio Manager Ben Inker and Carl O’Rourke, a Systematic Equity team quantitative researcher, provided an update on the ongoing attractiveness of Value relative to Growth. Even after Value’s recent significant outperformance, it is nowhere near back to its average relative valuation compared to Growth, which means the opportunity remains quite strong. And even if Value/Growth spreads do not continue to come back to historical averages, the act of rebalancing provides an incredible opportunity at today’s valuations.

Ben and Carl discussed the evolution of Equity Dislocation, which is long the cheapest Value stocks and short the most expensive Growth stocks and still our highest conviction Asset Allocation trade.

Read related research: Value vs. Growth: The Unwind Continues

Where Are We on Relative Valuations?

Valuation ratios have recovered, but they are nowhere near back to averages.

As of 9/30/22 | Source: GMO
Composite Valuation Measure is composed of price/sales, prices/gross profit, price/book, and price/economic book.

 


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


Quality Investing in Interesting Times

There’s been no shortage of topics to keep things interesting for investors today – a looming recession, inflation, rising rates, geopolitical risks, and Covid (which is still a disrupting force, three years in). Tom Hancock, Lead Portfolio Manager of GMO Quality and Head of the Focused Equity team, and Kim Mayer, Quality Portfolio Strategist, discussed how each of these key issues impacted Quality in 2022 and the markets in general. They also explained what separated successful Quality strategies from the rest in this year’s bear market and why we believe Quality offers strong downside protection.


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.

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

* Indicates required field

GMO Presenters

Grantham_Jeremy

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.

Hancock_Tom

Tom Hancock

Head of Focused Equity

Dr. Hancock is the head of the Focused Equity team, a portfolio manager for GMO’s Quality Strategies and a partner of the firm. Previously at GMO, he was co-head of the Global Equity team. Prior to joining GMO in 1995, he was a research scientist at Siemens and a software engineer at IBM. Dr. Hancock holds BS and MS degrees from Rensselaer Polytechnic Institute and a PhD in Computer Science from Harvard University.

Inker_Ben

Ben Inker

Co-Head of Asset Allocation

Mr. Inker is co-head of GMO’s Asset Allocation team, a member of the GMO Board of Directors and a partner of the firm. He joined GMO in 1992 following the completion of his bachelor's degree in Economics from Yale University. In his years at GMO, Mr. Inker has served as an analyst for the Quantitative Equity and Asset Allocation teams, as a portfolio manager of several equity and asset allocation portfolios, as co-head of International Quantitative Equities, and as CIO of Quantitative Developed Equities. He is a CFA charterholder.

Mayer_Kim

Kim Mayer

Focused Equity

Mr. Mayer oversees investor relations and is a research analyst within GMO’s Focused Equity team. Previously at GMO, he was a member of the Global Equity team focusing on the Quality Strategy. Prior to joining GMO in 2006, he managed the US fixed income syndicate desk at Morgan Stanley. Mr. Mayer earned his bachelor's degree in History from Princeton University.

O'Rourke_Carl

Carl O'Rourke

Systematic Equity

Dr. O’Rourke is a quantitative analyst for GMO’s Systematic Equity team and is a partner of the firm. Prior to joining GMO in 2006, he earned a BSc in Physics and a PhD in Computational Laser Physics from the University of Surrey.

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