Jeremy Grantham, co-founder of Boston-based asset management firm Grantham, Mayo, van Otterloo (GMO), believes the Standard and Poor’s 500 Index (S&P 500) could fall another 26 percent over the next 12 months, according to statements made by the investor last week. The GMO co-founder detailed his bearish sentiment by mentioning that he is shorting bonds and the Nasdaq Composite.
GMO co-founder says the ‘deteriorating fundamentals‘ is shocking – ‘Central banks will be scared, they may do what they can‘.
GMO investor and co-founder Jeremy Grantham’s stock market outlook is bleak, and on Wednesday he told Reuters that things could be much worse than the subprime mortgage fiasco of 15 years ago. “This is a more dangerous time for the global economy than the housing bubble madness of 2007“, Grantham said at the Reuters event. Jeremy Grantham is a well-known Wall Street investor and entrepreneur, having launched one of the first index funds in the early 1970s.
As of December 2020, GMO managed $65 billion in assets under management (AUM), and in recent times Jeremy Grantham has been a vocal critic of global economic skids. Grantham also had a lot to say during the “Great Recession” of 2007-2010, in statements regarding Barack Obama’s administration and the housing bubble that occurred at the time. Speaking to Reuters last week, Jeremy Grantham said the S&P 500 stock index could fall as much as 26 percent over the next year. During the discussion, he explained that he was also betting against the Nasdaq Composite and bonds.
Grantham pointed out that pockets of assets with super-high valuations, called “super bubbles“, had peaked at the end of last year. “The deterioration of fundamentals on a global basis seems absolutely shocking“, Grantham noted. A year from now, Jeremy 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 lot and that U.S. Christmas sales are expected to be much lower this year.
In addition, global reinsurers are blaming inflation and the Ukraine-Russia war for higher risk protection rates around the world. 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 last year’s inflation” said GMO’s chief asset strategist. “That makes a marginal bear market a pretty serious bear market“, Grantham added. Grantham joins Michael Burry and other Wall Street gurus who think a stock market crash is coming.