GMO 7 Year Asset Forecast Says Stay Away From Bonds

GMO has just released its monthly 7-year Asset Class Forecasts (November 2011).
Here are the expected annualized return (based on valuation and historical earning growth):

US Large caps: 1.8% per year
US Small caps: -0.4% per year
US High Quality: 5.4% per year
International Large caps: 5.8% per year
International Small caps: 4.6% per year
Emerging Markets: 5.6% per year

Different kinds of bonds are expected to return between -2.3% and 1.3% per year so that is all bonds are expected to return negative interests except emerging market bonds. Managed Timber is expected to return 6% per year.
Those are real returns adjusted for inflation of 2.5% per year.

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