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GMO Letters & Research Archive

GMO is a Boston asset manager co-founded in 1977 by Jeremy Grantham with Richard Mayo and Eyk Van Otterloo, known for valuation-driven dynamic asset allocation built on long-horizon mean reversion. Grantham is famous for calling historic bubbles, warning publicly ahead of both the 2000 dot-com crash and the 2008 financial crisis. Flagship publications include the GMO Quarterly Letter (now written by Asset Allocation co-heads Ben Inker and John Pease), Grantham's Viewpoints essays and the 7-Year Asset Class Forecast.

112 pieces · 2007–2026 · updated every Monday

2026

06-30Part 1: What Barbarians Like to Take PrivatePrivate equity (PE) buys entire companies with borrowed money. Many think it's a safe way to spread risk, but this report shows PE companies are often low-quality, heavily indebted, and concentrated i…→06-30Part 2: Letter to the Investment Committee on Private EquityThis article explains why the old approach of picking top private equity managers to beat the market no longer works. Research shows fund performance persistence—the chance that past winners will keep…→01-28Valuing AI: Extreme Bubble, New Golden Era, or BothGMO experts warn that AI stocks are in a bubble similar to past railroad and internet manias. They say AI is a real breakthrough, but investors are overpaying based on extreme optimism, forgetting tha…→

2025

12-31It’s Probably a Bubble, But There Is Plenty Else to Invest InThis report argues that AI stocks like Palantir look like a classic bubble, similar to the 2000 dot-com boom. But you don't have to bet on when it will pop. Instead, you can shift money away from US A…→09-30American UnexceptionalismThis report explains that the S&P 500's 15-year outperformance was driven by a handful of tech giants (like Apple, Nvidia) plus a strong dollar and rising valuations—not broad corporate strength. Now…→03-31Tariffs: Making the U.S. Exceptional, but Not in a Good WayGMO's report argues that the real problem with US tariffs isn't just the extra cost—it's the constant policy flip-flopping that makes companies freeze investment. For everyday investors, this means US…→03-31Trade: The Most Beautiful Word in the DictionaryThis report explains why broad tariffs hurt the economy rather than help it. It uses simple logic: trade is like your local supermarket—you can't produce everything yourself, so specialization and exc…→03-06Rising Toxicity and the Threat to Capitalism and Life ItselfThis report highlights a massively underestimated threat: tens of thousands of untested synthetic chemicals (like plastic additives and the pesticide glyphosate) are systematically damaging human fert…→

2024

12-31Bargain, Value Trap or Something in Between?This report from investment firm GMO helps regular investors tell the difference between a real bargain and a value trap. After a decade of US growth stocks soaring, GMO looks at three lagging assets:…→11-05Beyond the FactorThis report argues that traditional value investing (buying stocks with low price-to-book ratios) has underperformed not because value investing is broken, but because accounting metrics ignore intang…→09-19The What-Why-When-How Guide to Owning Emerging DebtThis article explains why emerging market bonds (like those from Brazil or India) are worth owning despite recent poor returns. The key point: local-currency bonds (priced in the country's own money)…→09-03Small WondersThis report says Japanese small-cap stocks have lagged large-caps since 2018, but a turnaround may be coming. The underperformance was due to external factors like a weak yen (Japanese currency) hurti…→06-30FAQ: Passive InvestingThis research looks at how passive investing (like index funds) affects the stock market. It finds that while passive investing may have slightly boosted mega-cap stocks and hurt small caps, its impac…→03-31Magnificently ConcentratedThis article argues that the US stock market is now so concentrated in a few mega-cap stocks (the 'Magnificent Seven') that most actively managed funds struggle to beat the S&P 500. But that doesn't m…→03-18Sustainability or BustAn investment firm GMO argues that perpetual economic growth is impossible on a finite planet. We're overusing resources and destroying nature, leading to problems like plastic pollution, chemical poi…→03-11The Great Paradox of the U.S. Market!The U.S. stock market is extremely expensive (the Shiller P/E, a measure of valuation, is in the top 1% historically), while the real world faces serious risks like climate change, resource shortages,…→03-04Emerging Debt Energy TransitionThis report looks at a unique opportunity in emerging market bonds tied to the shift from coal to clean energy. It argues that these bonds—often backed by government guarantees or contracts—are less r…→

2023

12-31The Quality AnomalyThis report uncovers a quality anomaly: high-quality stocks (strong profits, low debt) actually deliver higher returns with lower risk than low-quality ones, flipping the 'high risk, high return' rule…→12-21The Four 4s Behind the Compelling Opportunity in Japan EquitiesThis report argues that Japanese small-cap value stocks (smaller companies with low price-to-book ratios) are deeply undervalued. The Tokyo Stock Exchange is pushing firms to improve shareholder retur…→10-18Japan: The Land of the Rising ProfitsMany think Japan's profit surge is due to a shareholder-friendly shift, but GMO argues it's actually from decades of debt reduction — lower interest expenses boosted profits, not active payout increas…→09-30Beyond the LandingThis report says don't try to predict the next recession—most people get it wrong and lose money. Instead, avoid companies with too much debt (like private equity and junk bonds), because high interes…→09-18Turbulence on the Path to TransformationClean energy stocks have crashed over 70% from their 2021 peak, even though companies are making more money and policies like the US Inflation Reduction Act (IRA, a big subsidy package) are in place.…→08-23Does Democracy Matter for Emerging Sovereign Debt?This study asks: does a country’s democracy level affect the interest rates on its bonds? Surprisingly, the answer is no. Metrics like government effectiveness and rule of law matter much more. Some c…→07-19Estimating Value Chain Emissions for Portfolio ConstructionThis article explains why investors need to look beyond a company's direct emissions (Scope 1) and measure its entire supply chain's carbon footprint (Scope 2 and 3) to manage climate risk. It shows t…→07-11Slow Burn Minsky MomentsThis report from GMO introduces the idea of a 'slow burn Minsky moment' — when high private debt (over 150% of GDP in many countries like the US and Japan) makes the financial system fragile, even if…→06-30Weighted Average Green Revenue (WAGR): Integrating climate solutions into portfolio constructionThis report introduces a metric called Weighted Average Green Revenue (WAGR), which measures how much of a company's income comes from climate-friendly products like solar panels or electric vehicles.…→06-01Value Does Just Fine in RecessionsThis report challenges a common fear: that cheap stocks (value stocks) get crushed during recessions. GMO studied decades of data from the US and other developed markets and found that value stocks ac…→05-16The Curious Incident of the Elevated Profit MarginsThis report explains why U.S. corporate profit margins have stayed high for a decade and what it means for regular investors. The author admits his 2012 prediction that margins would fall was wrong. T…→05-09EM Quality Local Currency Debt – Another Piece of the PuzzleThis report explains GMO’s strategy for buying high-quality local-currency bonds from emerging markets (like China or India). The idea: pick countries with low inflation, low deficits, and high saving…→03-31The Quality SpectrumThis report explains GMO's 'Quality Spectrum' strategy, which buys high-quality stocks (profitable, low debt) and shorts low-quality 'junk' stocks (risky, unprofitable). The key insight: this combo of…→01-24After a Timeout, Back to the Meat Grinder!This report says that while stocks, bonds, and crypto took a big hit in 2022, the bubble isn't fully deflated—valuations are still above average. For regular investors, don't get fooled by early-year…→

2022

12-314Q 2022 GMO Quarterly LetterThis report says that after the 2022 market crash, some assets have become cheap and might be good buys. For example, hot stuff like crypto and growth stocks crashed, while unloved assets like commodi…→12-08EM Corporate Debt ESG IntegrationThis report shows how to use ESG (Environmental, Social, Governance) factors to better predict default risk in emerging market corporate bonds. The authors argue ESG isn't a moral filter but a quantif…→10-27Quality Time in Small CapThis report says now is a great time to buy high-quality small-cap stocks (shares of smaller companies). Because of recession fears, small caps as a group are cheap, but many are unprofitable 'junk st…→10-13Sovereign Contingent BondsThis report proposes a new type of bond for emerging countries like Pakistan. Normally, bonds require fixed interest payments. But when a crisis hits (like a flood), the country may default (fail to p…→09-303Q 2022 GMO Quarterly LetterThis report says value investing isn't over yet, even though value stocks beat growth stocks in 2022. Global value stocks are still cheap overall, especially the cheapest 20% of US stocks (deep value)…→08-31Entering the Superbubble’s Final ActThis report warns that the U.S. stock market is in the final stage of a rare 'superbubble,' like in 1929. After an initial drop, markets often bounce back—but that's a trap. History shows the worst dr…→06-302Q 2022 GMO Quarterly LetterThis report says the US dollar is very expensive right now, at a 35-year high, which could hurt US stocks but help European and Japanese stocks. Using historical data, the author shows that countries…→04-06Putin's Invasion Reminds Us That We Live in a Finite WorldThis report argues that the era of cheap resources is over. The Russian invasion of Ukraine highlights how limited oil, metals, and food really are. For decades, commodity prices fell, but now they're…→03-311Q 2022 GMO Quarterly LetterThis report argues that despite big price jumps in oil, copper, and other commodities, stocks of resource companies are still cheap and worth buying now. The reason: demand for materials like lithium…→01-20Let The Wild Rumpus BeginThis report by investing legend Jeremy Grantham warns that the US is in its fourth 'superbubble' in a century, with stocks, bonds, housing, and commodities all overvalued at once. He predicts the S&P…→01-10Japan Equities: Entrenched Perceptions Ignore Improving RealityThis report says many investors still think Japan's stock market is stuck in the past—low growth, low profits. But things have changed: Japanese companies' profit margins rose from 2.2% to 5.4%, and t…→

2021

12-314Q 2021 GMO Quarterly LetterThis report warns investors against two common mistakes: chasing US growth stocks while dumping Chinese and emerging market stocks, and blindly copying institutions that made big money from private eq…→09-303Q 2021 GMO Quarterly LetterThis report warns against using past average returns to predict future market performance. For example, U.S. 10-year bonds historically returned 7.6% annually, but with current yields around 1.6%, fut…→09-21Part 2: What to Do in the Case of Sustained InflationThis report explains what regular investors should do if inflation stays high. The key takeaway: don't blindly buy commodities (like oil or metals) to fight inflation—they can actually lose you money…→08-12Part 1: Inflation – Tall Tales and True CausesThis report argues that current inflation fears are overblown. Yes, governments printed money and ran big deficits, but the author says inflation won't stick unless wages rise significantly—which hasn…→06-302Q 2021 GMO Quarterly LetterThis report argues that the recent rebound in growth stocks doesn't mean the value investing comeback is over. In fact, the author sees this as the biggest opportunity for value stocks since the 1999-…→05-26An Expensive Market Need Not Mean Expensive StocksThis report argues that while the U.S. stock market looks very expensive (its price-to-earnings ratio is double the historical average), that's mostly because high-growth companies like Apple and Amaz…→03-311Q 2021 GMO Quarterly LetterThis report warns that many people in the stock market are now gambling on price moves (speculating) rather than investing seriously. The author argues this frenzy can't last, because when speculators…→03-24The Duration of Value and GrowthThis report challenges a popular idea: that growth stocks (like tech) are more sensitive to interest rates than value stocks (like old-school industries), so rising rates should boost value. The autho…→03-11Sovereign ESG IntegrationThis report explains how GMO, an investment firm, integrates ESG (Environmental, Social, Governance) factors—like carbon emissions, education, and government honesty—into assessing risk for emerging m…→02-24Chinese SOE DebtThis report is about Chinese state-owned enterprise (SOE) bonds. Some recent defaults by companies like Huachen Automotive and Yongcheng Coal have scared investors. But the author argues these aren't…→01-05Waiting for the Last DanceThis report by investing legend Jeremy Grantham (2021) warns that the US stock market is in a massive bubble, like 1929 or 2000. He shows extreme overvaluation: Tesla's market cap per car sold is $1.2…→

2020

10-30Covid-19, Climate Change, And The Need For A New Marshall Plan*This report argues that rich countries' economic growth has slowed down, and with climate change and COVID-19, we need a big government spending plan like the post-WWII Marshall Plan—but for green inf…→09-303Q 2020 GMO Quarterly LetterThis report says that cheap stocks (value stocks) are at their most undervalued in history, while expensive stocks (growth stocks, like Tesla) might be in a bubble similar to the 2000 dot-com era. For…→09-11The Mystery of SOE DebtThis report looks at state-owned enterprise (SOE) debt—bonds issued by government-controlled companies. Markets demand higher interest (about 200 basis points extra per year) because they think these…→08-18Sovereign Contingent BondsThis report looks at how emerging-market countries (like Honduras or Egypt) struggle with debt during global crises like COVID-19. Existing ways to reduce debt are too costly or complex. The author su…→08-12Reasons (NOT) To Be CheerfulThis report warns that the US stock market has surged about 47% since late March 2020, even though the economy is in terrible shape—unemployment jumped from 6 million to over 30 million. The author ar…→07-13Why We Are Not Worried About Elevated Profit MarginsThis report explains why high corporate profit margins in the US are unlikely to fall sharply. Many worry that margins are too high and must revert to historical averages, but the authors argue this f…→06-302Q 2020 GMO Quarterly LetterThis report explains why government bonds (like U.S. Treasuries) can no longer serve their two traditional roles: providing decent income and protecting portfolios during stock market crashes. With in…→04-30An Investment Only a Mother Could Love: The Tactical CaseThis report argues that natural resource stocks (like oil and metal companies) became the cheapest in history after oil prices crashed in April 2020. The key insight: even if commodity prices stay fla…→04-08It’s Always Darkest Before the DawnThis report says that even though global stocks are crashing, history shows cheap stocks (like value stocks in emerging markets, Europe, and Japan) often bounce back later in a bear market. For regula…→03-311Q 2020 GMO Quarterly LetterThis report explains why GMO, a major investment firm, cut its stock exposure from 55% to 25% after the market's sharp rebound from March 2020 lows. They argue that prices already reflect the best-cas…→03-25Fear and the Psychology of Bear MarketsThis piece explains how fear makes investors act irrationally in bear markets. It cites an experiment where people with brain damage who can't feel fear invested about 85% of the time in a favorable c…→03-16Dare to Be DifferentThis report argues that the classic 60% US stocks / 40% US bonds portfolio may deliver almost zero real return over the next decade (0% to 3% annually). The reason: US stocks are too expensive. The au…→02-29China’s Inclusion in the GBI-EMGD Benchmark: Beta and Alpha ImplicationsThis report explains how China's inclusion in a key emerging-market bond index (GBI-EMGD, a benchmark for local-currency bonds) changes the game for investors. The index's yield dropped from 5.0% to 4…→02-06Chemical Toxicity and the Baby BustThis report argues that chemical pollution is a hidden driver of falling birth rates, beyond just people choosing to have fewer kids or having them later. Sperm counts have dropped over 50% in 40 year…→

2019

09-303Q 2019 GMO Quarterly LetterThis GMO letter says that the gap between cheap and expensive stocks is now as extreme as before the 2000 dot-com bubble burst—and maybe even better. For regular investors, it means if you stick with…→07-30Risk and Premium: A Tale of ValueThis report explains why cheap stocks (value stocks) have underperformed expensive ones (growth stocks) for over a decade. The author finds it's not because value companies got worse, but because the…→07-17Gaming Out Sovereign Default When China Is a Major CreditorThis report explains a big shift: China is now the largest creditor to many poor countries, surpassing the World Bank and IMF. But China acts more like a commercial lender than a traditional aid donor…→06-302Q 2019 GMO Quarterly LetterThis report explains why big US companies have been super profitable over the past decade—not because they invested more or grew sales, but because they gained market power (like monopolies). They've…→04-15Thinking Outside the Box: How and Why to Invest in a Climate Change StrategyThis report explains why climate change isn't just an environmental issue—it's also an investment opportunity. The authors argue that the global shift to clean energy will require trillions of dollars…→03-311Q 2019 GMO Quarterly LetterThis report says investing isn't just about picking stocks and bonds. You also need to think about your job income and how it might crash along with the market. For example, people in finance—whose pa…→03-11Total Factor Productivity GrowthThis report argues that Total Factor Productivity (TFP), often called a measure of innovation, is actually just a weighted average of wage growth and profit growth. So the debate about whether innovat…→

2018

12-17The Late Cycle Lament: The Dual Economy, Minsky Moments, and Other ConcernsThis report argues that the US economy's recovery is the weakest since WWII, despite headlines about booming growth. GDP, productivity, and real wages are all growing slowly. There's a 'dual economy':…→08-08Emerging Markets - No Reward Without RiskThis report explains why emerging markets (like stocks in China, India, Brazil) are so volatile and whether now is a good time to invest. The key insight: their high volatility comes from a strong lin…→08-08The Race of our Lives RevisitedThis report says humanity is in a race for survival against slow-moving crises like climate change, soil loss, and population growth. Capitalism focuses on short-term profits, and some governments ign…→08-08The Race of our Lives Revisited (in a nutshell)This report explains how serious climate change is and what it means for investors. The author shows that in just 70 years, humans have pushed carbon dioxide levels to record highs, speeding up global…→05-15Is Investing Starting to Get Difficult Again?This report argues that investing has been easy for years due to low volatility and stocks and bonds moving in opposite directions, but that may be ending. Early 2018 saw more market swings, signaling…→02-16Don't Act Like Stalin!This report uses a 'Stalin pension' analogy—high target returns but severe punishment for failure. It examines 'high conviction' fund managers who make concentrated bets (high tracking error). In theo…→01-03Bracing Yourself for a Possible Near-Term Melt-UpThis report warns that US stocks are expensive but could still surge before crashing. The author, a veteran investor, notes that major bubbles like 1929 and 2000 ended with a final, fast rally. Now, w…→

2017

12-14Career Risk and Stalin’s Pension Fund: Investing in a World of Overpriced AssetsThis report argues that rising inflation is a bigger threat to your portfolio than a recession. With stocks and bonds already expensive, higher inflation would force interest rates up, causing both to…→12-14What Happened to Inflation? And What Happens If It Comes Back?This report argues that a sudden spike in inflation could hurt your portfolio more than a recession. Why? Because bonds currently offer very low real returns (adjusted for inflation) and stocks are ex…→08-24The Good Thing About Climate Change: OpportunitiesThis report argues that climate change isn't just a risk—it's a huge investment opportunity. The key idea is that clean energy (like solar and wind) is now cheaper than fossil fuels (coal, gas) withou…→08-15The S&P 500: Just Say NoThis report warns against putting all your money into the S&P 500 (the top 500 US companies). The US stock market has soared over the past 7 years, but that's mostly because stocks got more expensive…→08-03Why Are Stock Market Prices So High?This piece explains why GMO bought more emerging market stocks after they surged 18% in early 2017. Their logic: while the expected return of emerging value stocks (cheap, good-quality stocks) dropped…→08-03Emerging Value and Margin of SuperiorityThis piece explains why investment firm GMO bought more emerging market stocks in mid-2017 after they had already surged over 18%. Their logic: even though prices rose, these stocks became more attrac…→06-29I Do Indeed Believe the U.S. Market Will Revert Toward Its Old Means – Just Very SlowlyThis is investor Jeremy Grantham clarifying a common misunderstanding: he didn't say high valuations are permanent. He still believes U.S. profit margins and price-to-earnings ratios (a measure of how…→05-01Up At NightThis report says that investors often try to insure their portfolios (like using options to hedge risk), but most of the time, the cost of that insurance is too high and eats into long-term returns. I…→05-01This Time Seems Very, Very DifferentThis report warns that today's high corporate profits and stock prices are unlikely to last forever. History shows that extreme levels tend to return to normal over time. For regular investors, this m…→04-11For Whom the Bond Tolls: Low Rate Beneficiaries in a Rising Rate EnvironmentThis report explains that low interest rates over the past decade have inflated stocks that act like bonds—think utilities, REITs, and telecoms—which pay steady dividends. Now that rates are rising, t…→03-27Six Impossible Things Before BreakfastThis article by a GMO analyst argues against the idea that today's high market valuations are justified by permanently lower interest rates. The author says this belief requires accepting six nearly i…→03-22The Deep Causes of Secular Stagnation and the Rise of PopulismThis report explains why the economy has been stuck in low growth, low investment, and rising inequality—a condition called 'secular stagnation'—and why populism is on the rise. The author argues it's…→

2016

09-07An Investment Only a Mother Could LoveThis report argues that buying stocks of resource companies (like oil and metal producers) is far better than investing in commodity futures or private equity. Stocks give you the company's profit gro…→

2015

08-11The Idolatry of Interest Rates, Part II: Financial Heresy and Potential Utility in an ERP FrameworkThis report argues that investors should stop obsessing over interest rates. The author shows that real interest rates aren't set by market forces—they're a policy tool controlled by central banks. Ov…→05-15The Idolatry of Interest Rates Part IThis report argues that the 'equilibrium real interest rate'—a concept economists and central bankers love—is actually a myth, like chasing a will-o'-the-wisp. Using data and history, the author shows…→

2014

12-01The World’s Dumbest IdeaThis report argues that making 'maximizing shareholder value' a company's only goal is a bad idea. It compares IBM, which chased shareholder value, with Johnson & Johnson, which prioritized customers,…→09-30Is This Purgatory, Or Is It Hell?This piece explores two possible futures for markets: a temporary low-return 'purgatory' or a permanent low-return 'hell.' For everyday investors, it means your traditional stock-and-bond mix (like 65…→

2013

04-26The Race of Our LivesThis report says modern civilization is in a close race between self-destruction and salvation. On the bad side: we're overusing resources, damaging the environment, and ignoring warnings—just like pa…→02-15Hyperinflations, Hysteria, and False MemoriesThis report challenges the common belief that hyperinflation is simply caused by central banks printing too much money. Using historical cases like post-WWII China, Hungary, and Zimbabwe, the author a…→01-22New Options for Equity InvestorsThis report shows that while US stocks have returned about 6.5% annually over the long run, returns are very volatile and current high valuations suggest poor returns over the next 7 years. The surpri…→

2012

06-13Affirming the Case for QualityThis report argues that investors should focus on a company's profitability, not just its stock price swings, to measure risk. The authors show that firms with high and stable earnings and low debt (l…→04-18My Sister's Pension Assets and Agency ProblemsThis article explains how professional money managers, afraid of losing their jobs, often follow the crowd, making markets much more volatile than the economy. For regular investors, this means you ha…→

2011

08-17Emerging Consumers Just Want To Have Fun...This report says the investment story in emerging markets (like China and India) has shifted: instead of relying on exports or commodities, the real opportunity now comes from local consumers spending…→04-25Time to Wake Up: Days of Abundant Resources and Falling Prices Are Over ForeverThis report argues that the era of cheap, abundant resources is over for good. Rapid industrialization in countries like China has permanently reversed the 100-year trend of falling prices for commodi…→03-08The Seven Immutable Laws of InvestingThis report lays out seven timeless investing rules, like always demanding a margin of safety (buying way below what you think something is worth), ignoring 'this time is different' (history always re…→

2010

11-08Back to Basics: Six Questions to Consider Before InvestingThis report says investors should ask six basic questions before making decisions, instead of being swayed by recent market moves or sales pitches. For example, in 2000 everyone thought stocks were gr…→06-302Q 2010 GMO Quarterly LetterThis report from 2010 explains why a top investor thinks deflation (falling prices) is more likely than inflation (rising prices). He warns that the economy is recovering slowly, but stocks have ralli…→05-25I Want to Break Free, or, Strategic Asset Allocation Is Not Static AllocationThis report argues that sticking to a fixed mix of stocks and bonds (like 60% stocks, 40% bonds) is a mistake. The real risk isn't price swings (volatility), but losing money permanently. The author s…→

2009

03-10Reinvesting When TerrifiedThis piece is about why investors freeze up when markets crash, holding cash and missing the rebound. The author argues you shouldn't try to buy at the exact bottom—that just makes you more paralyzed.…→

2008

12-17When Diversification FailedThis piece explains why diversification failed during the 2008 crisis. When nearly all assets are overpriced (like in 2007), spreading your money across different stocks and bonds doesn't protect you—…→

2007

04-24It’s Everywhere, In Everything: The First Truly Global BubbleThis report argues the world is in its first truly global bubble—everything from Indian antiques to Chinese art, Panamanian land to London real estate, timber to junk bonds and blue-chip stocks is ove…→