GMO’s Dynamic Allocation Strategy Highlights Caution in Overvalued Markets
Valuation concerns are mounting among investors as global markets hover NEAR historic highs. John Thorndike, co-head of asset allocation at GMO, warns that expensive markets inherently carry lower expected returns and heightened risk. "Valuation isn't a precise timing tool, but overpriced assets falter fastest when sentiment shifts," he notes, referencing last week's volatility as Exhibit A.
GMO's response? The actively managed Dynamic Allocation ETF (GMOD), which pivots capital toward undervalued asset classes. The fund embodies the firm's signature mean-reversion philosophy, honed by Jeremy Grantham's prescient calls on the Dotcom bust and 2008 crisis. While avoiding alarmism, Thorndike suggests sidelining frothy equities—a stance increasingly echoed across Wall Street.
