GMO Quarterly Letter

GMO

Ben Inker, Jeremy Grantham

Research

15 Pages

GMO examines why emerging market value stocks remained unusually attractive even after an 18% rally in emerging equities during 2017. The paper also argues that elevated U.S. market valuations reflect investor comfort with high margins, low inflation, and stable growth rather than long term fundamentals.

Key Takeaways

Emerging Value Advantage: MSCI Emerging Markets rose over 18% in 1H 2017, yet GMO still increased exposure after forecasting 6.2% real returns for emerging value stocks.
Extreme Relative Opportunity: Emerging value’s “margin of superiority” reached its highest level since 1994, leading GMO to raise its maximum emerging allocation from 25% to 30%.
Behavioral Valuation Drivers: Jeremy Grantham argues stock market volatility has been roughly 18x greater than fundamentals justify, driven by investor reactions to margins, inflation, and GDP stability.
VIEW FULL REPORT

Join our newsletter to have all of this content + Exclusive Newsletter Bonus Content delivered to your inbox every week

Related Content

Portfolio Management
Do Podcasts Move the Stock Market?
Jun 2026
Portfolio Management
The Faucet and the Well: Cash Flow With a Lower Tax Bill
Jun 2026
Pension Funds & Endowments
US Endowment Study: Top 17 Funds Asset Allocation, Risk, and Risk-Adjusted Returns
Jun 2026

The information contained in this communication is of a general nature for informational purposes only, and does not constitute financial, investment, tax or legal advice. The information contained within this communication reflects the opinions of those referenced herein, and do not reflect the opinions of The Idea Farm, L.P. and its affiliates. Such opinions expressed herein are as of the date of production and are subject to change at any time without notice due to various factors, including changing market conditions or tax laws. Where data or information prepared by third parties is presented, no representation, warranty, or undertaking, expressed or implied, is given to the accuracy or completeness of such information by The Idea Farm, L.P. or any other person. While such sources are believed to be reliable, The Idea Farm, L.P. does not assume any responsibility for the accuracy or completeness of such information and does not undertake any obligation to update the information contained herein as of any future date. Any links to third party websites are offered only for use at your own discretion. The Idea Farm L.P., and its affiliates, are separate and unaffiliated from any third parties listed herein and are not responsible for their products, services, policies or the content of their website. All investments are subject to varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy or product referenced directly or indirectly in this communication will be profitable, perform equally to any corresponding indicated historical performance level(s), or be suitable for your portfolio. Past performance is not an indicator of future results.

Scroll to Top