A Challenging Global Outlook for the Next 50 Years

The above is never something I would venture to take a stab at, but GMO’s Jeremy Grantham has made a name for himself by making bold predictions about the future. His latest quarterly letter, entitled “On the Road to Zero Growth” is one of his best, in my opinion. A highly recommended read if you are interested in a 16-page article characterized by a lot of economic jargon. Granted, it makes a lot of sense and was written by someone who has been right an awful lot over his multi-decade investment career. Just thought I would share the link. Enjoy!

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3 Thoughts on “A Challenging Global Outlook for the Next 50 Years

  1. So…if he is right…and US doesn’t see the the historical 3% growth again in our lifetime…wouldn’t that lead to a correction of stock levels across the board once it sinks in?

    And if yes then how are money managers preparing for it? :-)

  2. Chad Brand on November 26, 2012 at 8:23 AM said:

    @Bobby:
    The good news is that slower growth alone would not really mean a drop in stock prices. Since stocks move long term in-line with earnings growth, it would mean that the historical earnings growth rate of ~6% (last 100 years) might not be matched over the next 100 years. Stock returns have been ~10% annually since 1900 (due to 6% earnings growth and a 4% dividend yield). Right now the dividend yield is only 2%. If GDP grows at 2% instead of 3%, we could see stock returns drop from 10% annually to 6%-8% annually in the future. Index fund investors need to adjust their long-term return assumptions as a result.

  3. kristine on December 13, 2012 at 12:55 PM said:

    Very well explained about the Global outlook for next 50 years…it will be really challenging for money managers and we need to be very careful for property investment or making money.

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