GMO’s Jeremy Grantham says people may be underestimating the impact the Japan crisis will have on the rest of the world, and says he’s growing less confident that the “Presidential Cycle” effect will boost stocks for the remainder of this year.

“What people will find, and what they might have underestimated, are the tentacles that Japan Inc. sends out around the world,” Grantham tells MarketWatch. “This could be a bigger factor for other countries than we had counted on.”

Grantham had previously had said he thinks equities are overvalued, but will continue to rise. A big reason: Stocks usually rise in the third year of a president’s term, as the president moves past more controversial initiatives and pulls out all the stops to boost the economy, to keep himself or his party in power. Now, Grantham’s not as confident. “Life is more complicated,” he said. “I would still bet on the third year, but the odds are no longer the 75%-plus that I might have given a few weeks ago.”

He now says that, thanks to the crises in Japan and the Middle East, the odds of stocks being higher six months from now are not much better than 50-50.

Grantham says investors would be wise to decrease their allocation to equities by several percentage points, and “phase out” by the end of September, according to MarketWatch.

One area Grantham is finding value: Japan. “There will be a lot of opportunities for stock picking in Japan,” he said.