Renowned investor Jeremy Grantham recently issued a warning to investors in his 2023 outlook letter, predicting that a stock market crash could be in store for later this year.[0] According to Grantham’s calculations, the S&P 500 could be at 3200 by the end of 2023, which would mark a 20% decline for the year and a 40% drop from its peak in January of 2022.[1] The probability of the market reaching these levels was estimated to be 3 to 1.[1] In a worst-case scenario, stocks could drop by as much as 50% from their previous peak.[1]
Grantham acknowledged that while the most extreme froth has been wiped off the market, valuations are still nowhere near their long-term averages.[0] He noted that even if the market falls by 50%, it would still be 37% cheaper than it was at the end of 2021. He warned investors that there are more downside potentials than upside, and urged them not to be tempted to think it absolutely cannot happen.
0. “Jeremy Grantham warns of a massive stock market crash in 2023 outlook” Markets Insider, 29 Jan. 2023, https://markets.businessinsider.com/news/stocks/jeremy-grantham-stock-market-crash-warning-2023-bubble-outlook-2023-1
1. “Legendary investor Jeremy Grantham warns stocks could drop another 50% this year—but he doesn’t say to stay away from markets entirely” Yahoo Life, 30 Jan. 2023, https://www.yahoo.com/lifestyle/legendary-investor-jeremy-grantham-warns-173553990.html