Jeremy Grantham, co-founder of Boston-based asset management firm Grantham, Mayo, and Van Otterloo (GMO), believes the Standard & Poor’s 500 (S&P 500) could fall another 26% during the next 12 months, As did the investor last week according to the statements of the giant. The GMO co-founder detailed his bearish sentiment, mentioning also shorting junk bonds and the Nasdaq Composite.
‘Central banks will be scared, they will do what they can, might’, says GMO co-founder
Investor and GMO co-founder Jeremy Grantham’s stock market outlook is bleak, 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 alarming-looking moment in global economics than the madness of the 2007 housing bubble,” Grantham said during a Reuters event. Grantham has been a well-known investor and entrepreneur on Wall Street since he started one of the first index funds in the early seventies.
In December 2020, GMOs reported $65 billion in assets under management (AUM) and, in recent times, Grantham has been an outspoken critic of the world’s economic blunders. Grantham also had a lot to say in statements related to Obama economics during the ‘Great Recession’ of 2007-2010 and the housing bubble at that time. Speaking to the Reuters Global Markets Forum last week, Grantham said the S&P 500 stock market index could fall 26% next year. During the discussion, he pointed out that he was also betting against the Nasdaq Composite and Junk Bonds.
Grantham stressed that pockets of super high valuation assets, called “superbubbles,” were at the top by the end of last year. “The fall in fundamentals on a global basis looks absolutely shocking,” commented Grantham. A year from now, Grantham predicts that the S&P 500 could print values of around 3,000 points, and may even be “decently low.” Reuters reports that inflation is affecting Americans a lot, and holiday sales in the US are expected to be very low this year.
In addition, global reinsurers are blaming inflation and the Ukraine-Russia war on the world’s rising risk protection rates. Veteran investor Grantham said people often forget to calculate inflationary pressures.
“People forget to adjust the S&P for inflation… Your assets are worth 9% because of inflation in the past year,” said GMO’s chief strategist for assets. “This makes a marginal bear market quite a severe bear market,” Grantham said. Grantham joins Michael Bury and other Wall Street gurus who believe a stock market crash is coming.
What do you think of Grantham’s opinion and the S&P 500 prediction? Let us know what you think about this topic in the comment section below.
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