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Jeremy Grantham predicts the S&P 500 will crash 50%

 


  • Jeremy Grantham predicts the S&P 500 will crash nearly 50% after the fourth “superbubble” the US has ever seen burst.
  • He explained the reasons why he is confident that the last will appear, just as his predecessors did in 1929, 2000 and 2008.
  • “This checklist for a superbubble going through its phases is now complete and the wild heckling can begin at any time,” he said.
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Jeremy Grantham, the legendary investor who predicted the last three market bubbles, predicts the S&P 500 will collapse nearly 50% after the fourth “superbubble” the US has ever seen burst, even with multiple ongoing efforts to prevent it.

The market historian, who has repeatedly warned investors they are caught in a historic bubble, said the benchmark could drop to around 2,500, down around 44% from Thursday’s close and 48% from the January high. The tech-heavy Nasdaq Composite could see a steeper slowdown, he added.

“At this time last year, it looked like we might have a standard bubble with standard pain for the economy,” Grantham said in a Remark published Thursday on the website of its Boston-based asset management company, GMO. “But over the year the bubble has moved into the super bubble category, one of only three in modern times in US equities, and the potential pain has increased accordingly.”

What made the bubble worse, according to the investor, was that it was accompanied by extremely low interest rates and high bond prices, as well as a real estate bubble and a “nascent bubble”. on raw materials.

In around 4,000 words, Grantham explained why he is confident the last “superbubble” will burst, just as its predecessors did in 1929, 2000 and 2008.

For example, he noted the acceleration of the bull market in 2020 until February 2021, when the Nasdaq was up 58% from 2019.

He also referred to an event that happened in 1929 and 2000 and is happening again today: the underperformance of speculative stocks as blue chips rise.

And the “tricky feature of crazy investor behavior” is indicative of a late-lived bubble, the 83-year-old added. The past year has seen the rapid rise of meme stocks such as GameStop and AMC in addition to cryptocurrencies like dogecoin as well as non-fungible tokens.

“This checklist for a superbubble going through its phases is now complete and the wild heckling can begin at any time,” he said. “When pessimism returns to markets, we face the biggest potential drop in perceived wealth in US history.”

He compared this bubble to Japan in the 1980s, which saw two real estate and stock market bubbles together. The United States, on the other hand, has three and a half major asset classes, with stocks, bonds, real estate and commodities bubbling simultaneously for the first time.

“And if the valuations of all of these asset classes return even two-thirds of the way to historical norms, total wealth losses will be in the order of $35 trillion in the states alone. United,” he said.

His advice to investors?

Avoid US stocks, invest in value stocks from emerging markets and several cheaper developed countries like Japan. Also, have cash for flexibility, as well as some gold and silver.

And as for crypto, this asset class makes him “more and more feel like the boy watching the naked emperor go by in procession,” he said.

Sources

1/ https://Google.com/

2/ https://markets.businessinsider.com/news/stocks/stock-market-outlook-jeremy-grantham-sp500-crashing-superbubble-gmo-50-2022-1

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