In its latest seven-year asset class real return forecasts, Grantham, Mayo, Van Otterloo & Co., a Boston-based asset management firm, noted that both stocks and bonds had generally declined so far this year, mainly because of strong appreciation in asset prices.

“With global equities up nearly 17% through July (and a more impressive 19% in the U.S.) and interest rates lower globally, our forecasts for U.S. and international stocks have declined as has our outlook for bonds (U.S., international hedged and emerging),” Rick Friedman, a member of GMO’s asset allocation team, said in a statement.

“We continue to favor emerging market value stocks, which are trading cheap relative to our long-term equilibrium assumptions. In addition, international value and U.S. small cap value stocks look attractive from a relative perspective.”

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