Deep Value Still Cheap

GMO argues international deep value equities remain one of the most compelling opportunities globally, despite strong recent performance, as valuation gaps versus the U.S. stay historically wide. 

• GMO’s deep value strategy trades at roughly a 40% discount to global ex-U.S. markets and ~60% discount to the S&P 500.
• Outperformance has been driven primarily by active portfolio rotation, not valuation expansion—suggesting room for further gains.
• Exposure to cheap currencies (¥, €, £) and wide value spreads support the case for continued mean reversion.
• Sector allocation has shifted dynamically, with profits taken in banks and redeployed into energy and other undervalued areas.

If value has already outperformed, why is it still cheap? GMO’s answer is simple: the re-rating may only be halfway through.