Jeremy Grantham Warns ‘Super Bubble’ in Stocks Has Not Burst Yet

“You had a typical bear market rally the other day and people were like, ‘Oh, it’s a new bull market,'” Grantham said in an interview. “That’s silly”.

Grantham said that the collapse of a super bubble occurred in several stages. First, there is a setback like the one in the first half of the year, then a slight uptick follows. Finally, the fundamentals break down and the market reaches its lowest point.

Global forces at play

Grantham became famous for spotting and profiting from bubbles in Japan in the late 1980s, tech stocks at the turn of the century, and US housing before the 2008 financial crisis. Some of his other bearish predictions over the years have been wrong or at least too early.

This time, he pointed to short-term issues, such as the effect of Russia’s invasion of Ukraine on Europe, which is grappling with food and energy crises, along with fiscal tightening and China’s lingering COVID-19 problems.

Although rising inflation caused declines in the first half of the year, falling corporate profit margins would cause the next round of losses, it said.

“My bet is that we’re going to have a pretty tough time economically and financially before this goes through the system,” Grantham said. “What I don’t know is: does that get out of hand like in the ’30s? Is it pretty well contained as it was in 2000, or is it somewhere in between?

Bloomberg Wealth

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