"Economic forecasting is a difficult proposition in the best of times," Inker writes. In a pandemic-ridden world, it is virtually impossible.

In late March, equities were "plausibly priced" for very bad outcomes. Now they are essentially "ignoring the possibility," Inker maintains.

So what's the upshot? Inker believes non-U.S. value stocks and global small-cap value equities are still priced to provide "investors a fair return or better" even in a bad economic scenario. Emerging markets are as well.

But that's an oversimplification. If the pandemic were to worsen, much of Latin America and Africa lacks the health-care infrastructure to cope, Inker says. East Asian countries are handling Covid-19 reasonably well, but Brazil is a disaster.

Market prices "almost always move in a more volatile direction" than fair values. That's why Inker says GMO is inclined to let its portfolios “run” for a while during normal rallies. This time, however, there is a much higher probability of "a really bad outcome."

The optimists may well turn out to be right, but he maintains it no longer seems "prudent to hold onto an equity-heavy portfolio."

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