Skip to Content

Grantham: Emerging Markets Equities ‘Priced not too Badly’

Grantham: Emerging Markets Equities 'Priced not too Badly'

This video is the second of four with GMO’s Jeremy Grantham. You can watch one, three, and four here.

Jeff Ptak: While GMO's forecasting abilities are widely respected, it seems like zipping around the market, slaloming around the market in that fashion could be quite tricky for an individual investor. I mean, how would one go about implementing that? Making sure that they're leaving themselves some margin for error given the fact that there's uncertainty that attends to these different forecasts that they'd be making.

Jeremy Grantham: I made it clear, by the way, in January that I was not suggesting that an individual undertake this. It's too hairy. I recommended that an individual just be more cautious. It takes a lot of confidence to move money around. You have to have pretty good data to make it worthwhile. I think we do. That's why I tend to use probabilities. We're never dealing with certainties. Once you start thinking in certainties, you have real trouble. When the facts move against me, I moved down from 50% probable to 35, which is my official forecast. If we keep on fighting trade wars with Canada and the EU, and so on, it will go to 30, and then eventually 25 and fade away.

Ptak: Suppose I'm an advisor or I'm an individual investor. Let's say I have a seven-year time horizon, we'll just pick a number arbitrarily, and I'm trying to think about how to purchase a portfolio.

Grantham: I fall back on a different paper I wrote, which is there are times when you simply have to be brave, and do things that don’t come easily. All asset classes pretty much are overpriced badly except emerging, which is priced not too badly, and particularly at the value end of emerging. It’s priced fine, so take as big a position as you dare in emerging. Avoid the U.S. as much as you dare. Don’t have much duration in the bond market, and you at least might muddle through quite well. This is not a period that you’re likely to make a lot of money, but let’s face it, the market has just tripled. You can’t follow markets, the triple with markets, the triple. It doesn’t happen, but at least by avoiding the U.S. that’s tripled, and emphasizing the emerging markets which has lagged far behind, you might be able to muddle through OK.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Markets

About the Author

Jeffrey Ptak

Chief Ratings Officer, Research
More from Author

Jeffrey Ptak, CFA, is chief ratings officer for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Before assuming his current role, Ptak was head of global manager research. Previously, he was president and chief investment officer of Morningstar Investment Services, Inc., an investment unit that provides managed portfolio services through fee-based, independent financial advisors, for six years. Ptak joined Morningstar in 2002 as a senior mutual fund analyst and has also served as director of exchange-traded fund analysis, editor of Morningstar ETFInvestor, and an equity analyst. He briefly left Morningstar to become an investment products analyst for William Blair & Company, and earlier in his career, he was a manager for Arthur Andersen.

Ptak also co-hosts The Long View podcast with Morningstar's director of personal finance and retirement planning, Christine Benz. A full episode list is available here: You can find him on social media at syouth1 (X/fka 'Twitter') and he's also active on LinkedIn.

Ptak holds a bachelor’s degree in accounting from the University of Wisconsin and the Chartered Financial Analyst® designation.

Sponsor Center