GMO upgrades emerging market returns forecast as spreads with the US reach widest since 2003

Attractive relative valuations

Grantham Mayo Van Otterloo & Co (GMO) has increased its forecast returns for emerging market equities, as the asset allocation team predicts the market is overestimating the long-term impact of the trade war between the US and China, while falls in US equities are expected to deepen.

According to the investment firm's Q4 seven-year asset class real return forecasts, emerging markets continue to offer the best value across both equities and fixed income. Emerging market equities are expected to return 3.2% on an annual basis, an upgrade from the 2% forecast made in Q4 2017, while GMO has predicted emerging market debt to deliver annual returns of 2.2% over the next seven years, higher than the 0.4% forecast made in Q4 last year. IW podcast: Are emerging markets still the future of the global economy? Meanwhile, the firm expects US large-cap equities to fall 5.2%...