The model's forecast of future fair P/E 10 assumes market profitability drops 30% and inflation and GDP volatility rise to 2008-like levels.

This claim describes the assumptions of Grantham/GMO's own model. True: the 2020 GMO document containing this forecast, in its exhibit notes or text, says the future 'fair P/E 10' forecast assumes market profitability falls by about 30% and that inflation and GDP volatility rise to levels like 2008's. Mostly true: the document states both assumptions, but a figure is slightly different (e.g. 25% or 'about a third') or the reference year is slightly different. Mixed: only one of the two assumptions (the profitability drop, or the rise in volatility) appears in the model description. Mostly false: the model's assumptions are described quite differently, keeping only a loose resemblance. False: the model's documented assumptions contradict this, for example assuming profitability holds steady or volatility stays low.

Set before the research began.

1. E1 ENTERING THE SUPERBUBBLE'S FINAL ACT GMO (Jeremy Grantham Viewpoints) · 31 August 2022 Own record

   “The next leg for the model is likely to be driven by falling margins.”

2. E2 ENTERING THE SUPERBUBBLE'S FINAL ACT GMO (Jeremy Grantham Viewpoints) · 31 August 2022 Own record

   “The first leg down in today’s superbubble was “explained” by rising inflation, which has been the main driver of historical valuations, after an unprecedented lag during the second half of 2021.”

Both evidence items come from a 2022 GMO paper, not the 2020 document whose exhibit notes the criteria require. E1 says only that falling margins will likely drive the model's next leg. E2 says rising inflation drove past valuations. Neither states the 30% profitability-drop assumption or the 2008-like volatility assumption for the forecast of future fair P/E 10, so the evidence cannot settle the claim.