Stocks have advanced this week in a carefree way except for the bump lower on Wednesday, with the major large-stock averages up around 2.7% and the Nasdaq 100 up almost 4%.

Thursday was fairly typical of the advance, as stocks steadily rose 1.1% from open to close with barely a break in the action.

It would be great if that could happen all of the time, right? But just the fact that we’re saying that was an ordinary day reveals how spoiled we have become from high volatility working mostly in our favor.

Just as a simple exercise, note that if your portfolio was up 1.1% every day for the 20 trading days of a month, you’d be up 24% by the end of that month. And if you did that every month for a year, your portfolio would be up 966%.

Now you know why you can’t be up 1.1% every day, because after a year you’d be way too rich for your own good!

Speaking of looking into the future, though, I received a very interesting forecast from GMO LLC this week — one of the premier money management firms in the world, responsible for $67 billion in equities and $11 billion in fixed income. It’s run by famed value investor Jeremy Grantham, who is one of those wise old men of Wall Street that you perennially see in Barron’s, or on television, explaining why the market is overvalued and why everything is going to be worse for days unending.

GMO has a great reputation on Wall Street for its seven-year forecasts, which it publishes every six months. For the last few years they have been dismal, with nothing beating the company’s favorite asset class, which is managed timber. (I’m sure you all have timber in your portfolios, right?)

Last year at this time, the forecast was for U.S. and international equities to lose value and for bonds to fail as well, which was my forecast, too.

Well, anyway GMO came out with a new seven-year forecast at the end of April, shown below, that turns out to be one of the sunniest it has ever published.

It’s actually pretty much in line with the views that I have been articulating — with a heavy emphasis on international — so I suppose it’s not so bad that it took me a month to get a copy.

The red line in the middle is 6.5%, which is the long-term historical U.S. equity return. Its stock forecasts are on the left in green and blue; its bond forecasts are on the right in red; and on the far right is GMO’s beloved timber in gray.

The body of the individual columns show GMO’s real-return expectations for each asset class, while the white section on top is what GMO believes it can add in extra value. The chart shows that GMO thinks the best asset class, starting on May 1 and going forward seven years, will be high-quality U.S. stocks, with a gain of 11.5% annualized for the class, though it thinks it can earn 13.3% for clients.

Second best is international small cap, at +9.1% and +11.4%. Third is emerging markets equities, at +6.5% and +10.2%. Fourth is international equities, at +7.65% and +9.9%. Fifth is emerging market bonds, at +4.9% and +7.8%, and then finally timber.

Many top fund managers look to GMO for guidance on this sort of thing, so it helps for you to know what they’re thinking. Since it coincides with what I’ve thinking, even better.

It all goes to show the importance of what traders call "location." If you bought iShares Brazil (EWZ) at $90 last year after a five-year run higher, that’s a bad location — valuation is rich and the sentiment is full. But if you bought at $35-$45 this spring, that’s a good location as valuation was low and sentiment was poor.

I think it’s still a good location.

To see my recommendations along those lines, accept a risk-free three-month trial to my Trader’s Advantage service. Details here.