Jeremy Grantham, the co-founder and long-term investment strategist of GMO, has warned that the popping of the bubble in US stocks is far from over and investors shouldn’t get too excited about a strong start to the year for the market. According to Grantham, the market increase during the pandemic is an example of a bubble, and it has not yet fully deflated. He believes that a further drop of 20% is possible this year – and in his worst-case scenario, he says that the S&P 500 could collapse as much as 50% from current levels.[0]
Since early 2018, Grantham has been cautioning investors that a significant market crash could be imminent, even as the stock market was reaching a series of new highs.[1] Last year, the bubble finally burst, causing the S&P 500 to drop approximately 20 percent.[1] The anxiety surrounding a potential recession has been intensifying during the latter part of 2022 due to ongoing macroeconomic instability.[1]
Jeremy Grantham, of GMO, is still bearish despite the beginning of a new year. In a letter on Tuesday, he predicted that the stock market will decline another 20% in 2020.[2] Whether or not Grantham’s pessimistic expectations are realized this year will depend on investor confidence, which has been gradually reducing since 2022, with each stock market rally being met with selling.[2]
Certain occurrences that could potentially undermine investor confidence include a downturn in the housing market, a recessionary economy, and dwindling corporate profits.[3] Investors have yet another concern to grapple with this year: the debt ceiling.[2] Grantham commented that, despite the painful bear markets of 2000 and 2008, we remain optimistic that the first rate cut will be the death of the bear. It is remarkable, he said, that these clear, recent negative examples are so easily overlooked.[2]
I anticipate that the value of the S&P 500 (SP500) (NYSEARCA:SPY) will reach 3200 by the end of 2023, adjusted for trendline growth and inflation.[4] It is probable that (3 to To follow the trend and spend some time beneath it this year or the following one.[5] Explicitly, 3200 would be a decrease of only 16.[4]
0. “Jeremy Grantham Predicts More Doom and Gloom Ahead; Here Are 2 ‘Strong Buy’ Dividend Stocks to Protect Your …” TipRanks, 26 Jan. 2023, https://www.tipranks.com/news/article/jeremy-grantham-predicts-more-doom-and-gloom-ahead-here-are-2-strong-buy-dividend-stocks-to-protect-your-portfolio
1. “Jeremy Grantham Warns of an ‘Unexpectedly Dire’ Final Phase of the Downturn” Institutional Investor, 24 Jan. 2023, https://www.institutionalinvestor.com/article/b8x4x15rkczz10/Jeremy-Grantham-Warns-of-an-Unexpectedly-Dire-Final-Phase-of-the-Downturn
2. “Jeremy Grantham Says the Stock Market Could Crash 50% This Year” Markets Insider, 24 Jan. 2023, https://markets.businessinsider.com/news/stocks/jeremy-grantham-stock-market-outlook-crash-bubble-final-phase-warning-2023-1
3. “Legendary investor Jeremy Grantham says the stock market could crash 50% this year as the bubble enters its ‘f” Business Insider India, 24 Jan. 2023, https://www.businessinsider.in/stock-market/news/legendary-investor-jeremy-grantham-says-the-stock-market-could-crash-50-this-year-as-the-bubble-enters-its-final-phase/articleshow/97289876.cms
4. “Jeremy Grantham says ‘easiest leg’ of stock-market bubble burst is over. What’s next.” MarketWatch, 24 Jan. 2023, https://www.marketwatch.com/story/jeremy-grantham-says-easiest-leg-of-stock-market-bubble-burst-over-heres-whats-next-11674584001
5. “Jeremy Grantham: Market froth wiped out, but complexities remain (NYSEARCA:SPY)” Seeking Alpha, 25 Jan. 2023, https://seekingalpha.com/news/3927536-jeremy-grantham-says-market-froth-has-wiped-out-but-valuations-still-far-from-long-term-averages