GMO'S JAMES MONTIER: We Are Stuck In A Purgatory Of Low Returns - Everything Looks Expensive

Compared with the forecasts it released at the end of the third quarter of 2012, bonds are generally looking better, while stocks are looking worse.

Still, nothing stands out as particularly attractive. This is the thesis of GMO's James Montier who has written a section titled "The Purgatory of Low Returns."

"This might just be the cruelest time to be an asset allocator. Normally we find ourselves in situations in which at least something is cheap; for instance when large swathes of risk assets have been expensive, safe haven assets have generally been cheap, or at least reasonable (and vice versa)," wrote Montier, a member of GMO's asset allocation team. "However, today we see something very different. As Exhibit 2 shows, today’s opportunity set is characterized by almost everything being expensive."

The chart below shows GMO's updated forecasts.

The next chart shows GMO's most recent forecasts, issued in November, 2012.