US Growth Stocks To Lose Their Crown To International Value In Coming Years | John Thorndike, GMO

**SPEAKER_1** (0:03)
When did making plans get this complicated? It's time to streamline with WhatsApp, the secure messaging app that brings the whole group together. Use polls to settle dinner plans, send event invites and pin messages so no one forgets mom's 60th, and never miss a meme or milestone, all protected with end-to-end encryption. It's time for WhatsApp. Message privately with everyone. Learn more at whatsapp.com.

**John Thorndike** (0:29)
So if you look at this chart, it's important to recognize that a normal real return to stocks is somewhere around four and a half, five, maybe five and a half percent. So you're getting paid better than that for owning value stocks outside of the US for sure. The other thing to note about this chart, as it says on the left-hand side, is these are real return forecasts, and they're also in local currency. Now, since the US dollar looks quite expensive, that tends to be a tailwind for US investors who are owners of non-U.S. assets. So we think the expected returns from these blue bars should be augmented by an expected currency return that pushes some of these six or seven and a half percent returns up closer into the high single-digits, low double digits.

**Adam Taggart** (1:30)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. I always say the most valuable people to interview are capital allocators, because they've got to answer to their clients for their market calls. They're judged not by their opinions, but by their results. So today, we're fortunate to hear from one of the most respected capital management firms in the world, Grantham, Mayo, Van Otterloo, otherwise known as GMO, which was co-founded by the great investor, Jeremey Grantham, and currently manages over $65 billion worth of client assets. Specifically, we're sitting down with John Thorndike, Co-Head of Asset Allocation, who co-manages GMO's dynamic allocation and international value ETFs. We'll discuss GMO's outlook for 2026 and where the firm sees the biggest risks and opportunities for investors. John, thanks so much for joining us today.

**John Thorndike** (2:23)
Thanks for having me, Adam.

**Adam Taggart** (2:24)
Well, it's a real pleasure, John. And you may look familiar to some of the viewers here because you spoke at Thoughtful Money's Spring Online Conference this year. This is your first appearance on the public channel. So very excited for that. We have a lot of people who are huge fans of your co-founder there, Jeremy Grantham, and very interested to hear what his firm is thinking these days. And we got a lot of great feedback when you appeared on the conference early in the year. So I know folks are going to be excited to have you back, at least those who have seen you before.
Really quick, before we dive into the discussion, I just want to give a little caveat. As a lot of my audience who follows me on social media knows, I'm on day five of a five-day fast right now, and I actually feel fine. But if I start slurring or pass out or anything like that, don't take it personally, John.

**John Thorndike** (3:14)
Sounds good. That's quite a feat.

**Adam Taggart** (3:16)
Okay. It's a quick way to get a lot of undue respect from a lot of people, is to tell them that you're doing a fast. It really isn't as crazy as it sounds, but to a lot of people, they're just like, I cannot believe you're doing that. Trust me, I enjoy all the kind words and praise, but I feel like I deserve almost none of it. But enough of that. So look, a lot to talk about with you, John. As I mentioned several times already, your firm is just highly respected. So why don't we just start with this?
What is your, and taking into your answer kind of what you know of GMO's perspective as well, what is your current assessment of a global economy and financial markets?

**John Thorndike** (4:02)
I'd say on the economy in a word, uncertain. We have been living in highly uncertain times. That continues today. We don't know where policy is headed. We don't know how many parts of the economy are reacting to changes in the labor force, changes in tariff policy, changes in immigration enforcement, what may be coming from the Supreme Court on tariffs. So many uncertainties that as financial market investors, we continue to do what we've always done within the GMO Asset Allocation team which is let valuations be the guide to us of where the best opportunities are and where the most worrisome risks are in markets. And there, I'd say in terms of financial markets, probably the word would be dispersion. There are some parts of the markets that to us look quite risky and worth staying away from, and there's certain parts that are worth leaning into. So, you know, we can go back and talk about how today's environment compares to other periods in time that have been interesting inflection points in markets and maybe compare and contrast some of those. But today very much feels like an environment where there's a lot worth doing and some parts of the markets that are definitely worth avoiding.