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Rekenthaler Report

Fortune Doesn't Always Favor the Bold

Discretion can be the better part of valor.

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Case Study
The year is 2013, and you are an investment professional at Grantham Mayo Van Otterloo & Co, generally known as GMO. Your firm has an excellent reputation, highly regarded for its dispassionate asset-allocation process. Other companies may be swayed by the prevailing winds, but not GMO. It invests where the opportunities lie, rather than where the headlines indicate.

The 2013 indicators do not favor stocks. The forward-looking price/earnings ratios for global developed markets aren’t terribly high, about 15, but both gross domestic product and earnings growth are sluggish, and the economic recovery is beginning to feel long in the tooth. It has just finished its fourth year, with the average economic expansion since 1950 lasting just over five years. That doesn’t look promising.

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John Rekenthaler does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.