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Jeremy Grantham, the co-founder of the Boston-based asset management firm Grantham, Mayo, & van Otterloo (GMO) believes Standard and Poor’s 500 (S&P 500) could drop another 26% during the next 12 months, according to statements the veteran investor made last week. The GMO co-founder detailed his bearish sentiment by mentioning he’s shorting junk bonds and the Nasdaq Composite as well.
GMO Co-Founder Says ‘Deterioration in Fundamentals’ Is Shocking — ‘Central Banks Will Be Spooked, They’ll Do What They Can, Maybe’
The investor and GMO co-founder Jeremy Grantham’s stock market outlook is gloomy, and last Wednesday he told the Reuters Global Markets Forum that things could be far worse than the subprime mortgage fiasco 15 years ago. “This is a more dangerous looking moment in global economics than even the madness of the housing bubble of 2007,” Grantham opined during the Reuters event. Grantham is a well known investor and entrepreneur on Wall Street, as he started one of the first index funds in the early seventies.
In December 2020, GMO managed $65 billion in assets under management (AUM) and in recent times, Grantham has been a vocal critic of the world’s economic blunders. Grantham also had a lot to say during the 2007-2010 ‘Great Recession,’ in statements concerning Obama economics and the housing bubble that took place at the time. Speaking to the Reuters Global Markets Forum last week, Grantham said the S&P 500 stock market index could drop by 26% in the next year. During the discussion, he explained that he was betting against the Nasdaq Composite and junk bonds as well.
Grantham stressed that pockets of assets with super high valuations, called “superbubbles,” had topped by the end of last year. “The deterioration in fundamentals on a global basis looks absolutely shocking,” Grantham remarked. A year from now, Grantham predicts that the S&P 500 could print values of around 3,000 points, and even be “decently lower.” Reuters reports that inflation is affecting Americans a great deal, and holiday sales in the U.S. are expected to be much less this year.
Furthermore, global reinsurers are blaming inflation and the Ukraine-Russia war on the world’s rising risk protection rates. The legendary investor Grantham said people often forget about calculating inflationary pressures.
“People forget to adjust the S&P for inflation … your assets are worth 9% because of inflation in the last year,” GMO’s chief strategist of assets said. “That makes a marginal bear market a fairly serious bear market,” Grantham added. Grantham joins Michael Burry and other Wall Street gurus who believe a stock market crash is coming.
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