LionelPort.com

GMO recently published their forecast of real returns for various asset classes over the next 7 years. These forecasts are based on the dividend yield plus the projected earnings growth rate and a reversion to the mean of current PE values.

The colorful graphic pdf file can be found at: GMO Free registration is required.

Long-term real returns of US stocks have been +6.5% historically to put the figures below into context.

Here is a table of GMO’s projected real after-inflation returns per year:

Asset…………….Real Return …Standard Deviation

US Large Cap………….-0.5%….6.5%
US Small Cap………….-1.4%….7.0%
US High Quality……….+3.4%….6.0%
Int Large Cap…………+1.7%….6.5%
Int Small Cap…………+0.7%….7.0%
EmergingMkt…………..+3.5%….10.5%

US Govn’t Bonds……….+1.9%….2.0%
Int Govn’t Bonds………+1.2%….2.0%
EmergingMkt Bonds……..+1.2%….8.5%
US TIPS………………+1.9%….1.5%
US Treas Bills………..+1.7%….1.5%

Managed Timber………..+5.5%….5.5%
REITs………………..-1.1%….
US Large Growth……….+1.1%….
US Large Value………..-1.9%….
US High Quality……….+3.4%….6.0%
US Low Quality………..-6.6%….
US Small……………..-1.4%…
US Small Growth……….-1.2%…
US Small Value………..-1.5%…
EAFE…………………+1.7%….
Int Large Growth………+2.2%….
Int Large Value……….+1.3%…
Int Small…………….+0.7%….
Int Small Growth………+1.2%…
Int Small Value……….+1.0%…

In addition to using your age, these figures might be helpful when rebalancing your asset distribution.