GMO: The S&P is over-valued on every model

GMO: The S&P is over-valued on every model. Having spent a large proportion of my career working at investment banks, I'm well aware of Stockbroker Economics, the second tenet of which is The market is always cheap. Over the years I've witnessed many attempts by the practitioners of this dark-art to justify why tried and tested measures of valuation are no longer meaningful. (At GMO) we average across the various models to generate our best forecast as to where real returns are likely to head, rather than relying upon one model. Doing so currently results in our expectation of a -1.1% real return for the S&P500 over the next seven years. We continue to believe that the weight of valuation evidence suggests the S&P 500 is significantly overvalued at its current levels. Some call us valuation bears. We argue that we are simply valuation realists. (VIEW LINK)

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