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“ We have a few weeks of extra cash and a few weeks where you put your last, desperate chips in the game, and then an even more spectacular failure … When you’ve reached this level of obvious super enthusiasm, the bubble has always, without exception broken in the next few months, not a few years.
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That’s the latest from Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co., who is issuing a stark warning to speculators propelling the stock market to new heights amid the worst pandemic of the past century.
In an interview with Bloomberg TV’s “Front Row,” the legendary investor, who is often credited with several forward-looking market calls over the past two decades, points out that a steady rise in stocks, fostered by free money from the Federal Reserve and the fiscal authorities. stimulus, cannot continue without consequences.
“If you think you live in a world where output doesn’t matter and you can just make paper, sooner or later you’re going to do the impossible, and that’s bringing inflation back,” Grantham warned.
This is far from the first word of warning that Grantham has sounded in recent weeks, but he now points to the $ 1.9 trillion coronavirus aid package proposed by newly inaugurated US President Joe Biden as further reason for the eventual burst. of the bubble.
Grantham is worth paying attention to for his forward-looking calls over the years. He said stocks were overvalued in 2000 and again in 2007, ahead of those market declines, The Wall Street Journal reports. Grantham also indicated that elements of the financial market had become disconnected from reality in the run-up to the 2008-2009 financial crisis.
However, GMO lagged badly on the S&P 500 index SPX,
in 2020, according to a report by Bloomberg News on Tuesday.
In June, one of GMO’s chief investment officials, Ben Inker, told investors it was time to sell stock, in a letter to customers quoted by Bloomberg. Inker suggested to Bloomberg that investing is not an easy game.
US stocks, meanwhile, have defied Grantham’s bearish forecasts and gravity. The Nasdaq Composite Index COMP,
the Dow Jones Industrial Average DJIA,
and the S&P 500 index are all trading near historical highs.