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Man credited with calling the 2008 crisis says the next 20 years in the stock market will ‘break a lot of hearts’

“In the last 100 years, we’re used to delivering perhaps 6%,” but the U.S. market will be delivering real returns of about 2% or 3% on average over next 20 years, the value investor and co-founder of Boston-based asset manager GMO told CNBC in a rare interview. 

The cyclically adjusted price-to-earnings (CAPE) ratio, a popular gauge of stock-market value created partly by Nobel laureate economist Robert Shiller, stands at 30.04, well above its historical average of 16.61. 

What’s an investor to do then, if U.S. stocks will offer such comparative lackluster results? Jeremy Grantham advocates buying emerging markets, including China, where he thinks 6% or 8% returns are achievable.

DYI:  Jeremy Grantham is stating nominal return minus their expected inflationary rate.  What is not covered are expenses that the typical mutual fund holder has with their 401k’s.  Most have a 1% management fee and trading impact costs that have a drag on performance of around 0.5%.  So...for monies held in stocks or purchased today after all expenses, the expected return over the next 20 years is 0.50% to 1.50%!  Ouch!  No doubt this is a lousy time to be purchasing stocks on a wholesale basis here in the American market.  Either look else where as Jeremy advocates – or simply wait until better valuations arrive here at home.

DYI