GMO's 7-year forecast implies U.S. equities would return minus 1.4% real per year as P/Es and profit margins revert to long-term averages.

This is a prediction that U.S. equities would return about -1.4% real per year over the 7 years from April 2007, judged around April 2014 (calendar 2014 at the latest). Measure: the annualized real (inflation-adjusted, CPI) total return of a broad U.S. large-cap index (S&P 500 or GMO's own U.S. large-cap benchmark) over that period. TRUE: the realized annualized real return lies between -2.4% and -0.4%. MOSTLY TRUE: it is negative but outside that band (above -0.4%, or between -4% and -2.4%). MIXED: it is roughly flat, between 0% and +1%. MOSTLY FALSE: it is between +1% and +3%. FALSE: it is above +3%, or below -4% (well wide of the forecast in the other direction). The hedge ('if', 'it just might happen') does not change the test: the forecast figure is judged against the outcome.

Set before the research began.

1. E1 2007 dollars in 2014: $100 → $114.18 | Inflation Calculator in2013dollars.com (Official Data Foundation / Alioth Finance)

   “| Real Inflation Adjusted | $100 | $147.57 | 47.57% |”

2. E2 2007 dollars in 2014: $100 → $114.18 | Inflation Calculator in2013dollars.com (Official Data Foundation / Alioth Finance)

   “if we had invested $100 in the S&P 500 index in 2007, our investment would be nominally worth approximately $168.49 in 2014. This is a return on investment of 68.49%, with an absolute return of $68.49 on top of the original $100.”

3. E3 S&P 500 Returns By Year US500 (Logarithms LLC)

   “| 2008 | -37.00% | 0.11% | -37.07% |”

4. E4 Market Valuations and Expected Returns - December 4, 2014 Yahoo Finance · 4 December 2014

   “GMO expected US large cap real return is -1.7%.”

E2 is an independent calculator page titled "2007 dollars in 2014: $100 → $114.18". It says $100 put into the S&P 500 in 2007 would be worth about $168.49 in nominal terms by 2014. The same page gives an inflation-adjusted value of $147.57 (E1). That figure matches $168.49 divided by the title's inflation factor of 1.1418, which works out to roughly +5.7% real per year over the 7 years. This is far above the +3% line for a false verdict and well wide of the forecast of −1.4% real per year. The page does not measure the April 2007 to April 2014 window, so the figure is an approximation of the period the criteria set; even so, the 47.57% cumulative real return [E1] is far above what +3% a year over about seven years would produce. E4 shows GMO still forecasting a negative return in late 2014, but that is a new forecast, not the outcome.