Rally Continues to Reduce GMO's Asset Class Return Forecasts

Investment Management firm GMO is well know for it's Asset Class forecasts it puts out. The continued strong rally in the market has officially moved their 7-year forecast for Large-Cap stocks (S&P 500) into negative territory, joining their negative forecast for Small-Cap stocks, US Bonds, Intl Bonds (hedged), and Inflation Linked Bonds.

You can see below the history of their forecasts. Through time it has shown to be a good general guide.

With so little looking attractive how are they investing their Benchmark Free Allocation Strategy I discussed here?

While this is from 12/31/12 not much has changed except a slight increase to their Equity Risk Premium Strategy (which is a put selling strategy) they are using as a substitute for some equity exposure.