If you have a 401(k) and you’re of a nervous disposition, you probably don’t want to look at the chart above.
Even by the standards of GMO, the super-cautious money management firm in Boston best known for its famous co-founder Jeremy Grantham, it’s terrifying.
It shows about the worst medium-term forecasts on record for pretty much all the assets most of us own in our retirement accounts. Large company U.S. stocks like the S&P 500 SPY, -0.88% ? Small company U.S. stocks like the Russell 2000 RUT, -1.42% ? International stocks? U.S. bonds, foreign bonds, inflation-protected bonds? GMO thinks if you buy them now and hold them over the next seven or so years, they will all – all—lose you money in real, purchasing-power terms.
In the case of some of these mainstream investments, the predicted losses are huge. Those 8% and 8.5% annual losses on U.S. large-caps and small-caps? If they happen, they’ll mean your SPDR S&P 500 ETF SPY, -0.89% and Vanguard S&P 500 Trust VOO, -0.88% and Schwab U.S. Small-Cap ETF SCHA, -1.74% lose about half their value, in inflation-adjusted terms, by 2028.
I’ve been following GMO’s forecasts for nearly 20 years. I’ve never seen one this bad, and I’ve seen some that were really bad—like the ones they made in 2000 and 2007, just before the two big crashes.
There is a tendency at certain moments for market followers to roll their eyes whenever anyone mentions the latest gloomy predictions from GMO. “Those guys have been wrong for years,” say skeptics. They point out, for example, that GMO 10 years ago predicted emerging markets would probably do really well and U.S. stocks badly. Instead, the reverse happened.