Jeremy Grantham (GMO): -2.8% annual return forecast for small U.S caps

GMO has just released its monthly 7-year Asset Class Forecasts and here are the expected annualized return (based on valuation and historical earning growth):

• US Large caps: -0.1% per year
• US Small caps: -2.8% per year
• US High Quality: 4.6% per year
• International Large caps: 3.2% per year
• International Small caps: 0.2% per year
• Emerging Markets: 4.3% per year

Different kinds of bonds are expected to return between -0.7% and 1.7% per year.
Managed Timber (how to invest in this?) is expected to return 6% per year.
Those are real returns adjusted for inflation of 2.5% per year.

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