The Market Bubble Will Burst, Says Jeremy Grantham

The Market Bubble Will Burst, Says Jeremy Grantham

Today’s U.S. market bubble is unique, says GMO co-founder Jeremy Grantham, but it will soon burst. This according to a recent article in Advisor Perspectives.

In an interview earlier this month, Grantham said that stocks are currently overpriced, but there is no way to know when they will peak. One clue, he added, would be the emergence of “crazy” behavior by investors which, he said, “was not lacking in the rally off the COVID low.”

“My bet,” said Grantham, “is that reality will catch up with the high P/Es.”

Other takeaways from the interview:

  • “You can never do too much” when it comes to climate change, says Grantham. He believes that those who understand and accept it need to do everything in their power to effect change. He argues that it will take trillions of dollars to “green” our economy, but it is a necessity.
  • While supportive of the fiscal and monetary response to the pandemic, Grantham said there are differing long-term impacts between the two.
  • Grantham “recommended avoiding U.S. equities in favor of emerging markets—which he believes are “guaranteed to grow fast.” For those inclined to favor the U.S., he prefers deep-value stocks.”
  • “We are going to have a very big reversal in favor of value sooner or later,” according to Grantham.
  • Regarding the FAANG stocks, Grantham said he has “never seen as concentrated a group of disruptive, fast moving companies that were built on intellectual capital.” But he argued that these shares have been bid up and that “even the best companies can be overpriced.”