Jeremy Grantham Says His ‘Superbubble’ Warning Looks Confusing Now

  • Jeremy Grantham is no longer sure about his “superbubble” warning, considering the uncertainties of the Russia war.
  • Calling Putin a “borderline psychopath,” Grantham warned investors to expect anything to happen.
  • “When a war starts, everything gets mixed up and all the uncertainties multiply,” he told ThinkAdvisor this week.

Just a month ago, Jeremy Grantham was warning of a ‘superbubble’ in stocks that would send the S&P 500 falls 50% when it exploded President Vladimir Putin is now making you doubt that.

“Everyone’s risk profile has gone up, because you can’t rule out that the Russians are a bit crazy and irrational,” says the veteran investor. told ThinkAdvisor in an interview this week. “Putin is a borderline psychotic.”

“The use of a tactical nuclear weapon cannot be ruled out,” he added.

The GMO co-founder said in January a epic market crash it was coming, after diagnosing the fourth US superbubble in the last century, despite multiple efforts being made to prevent it.

But the Russian invasion of Ukraine has made Grantham less comfortable with his prediction, given that war is a complicated event, fraught with unintended consequences, he said.

“The flight path is not as safe as it was a month ago,” he said.

“There has never been a war in the middle of a big bubble like this. So I reserve the right to take some more time to think about it and work out the implications.”

Sanctions against Russia for its war in Europe have disrupted commodity markets, creating immense uncertainty on financial markets. Fears of supply disruption have caused oil to increaseand led to chaos in the nickel market.

Market historian Grantham, who has been calling out market bubbles for decades, including the 2008 housing bubble and the global financial crisis, says investors need to be prepared for anything.

“War bodes ill for world growth and world trade, and for price increases,” he said.

Grantham said that the day before the Russian invasion on February 24, he was as certain as things were in the market that the final stages of the

bull market

– what he describes as the “Vampire Phase” – were coming to an end.

“But when a war starts, everything gets mixed up and all the uncertainties multiply,” he said.

“We were certainly in the vampire phase. But I am humble enough to say that when a war of this magnitude occurs, with ramifications that could extend beyond that, all bets are off.”

Before his prediction went sour, Grantham said that the market looked uncannily like the dot com 2022 bust: the last great super bubble.

“I expected that to continue for a few months, with blue-chip stocks falling reluctantly or not at all, until finally, at some point, perhaps in the fall, the broader market would give up the ghost, as it did in 2000”.

He said it’s quite likely that the superbubble will still deflate. One factor would be whether the US government injects more stimulus to support the economy, which it did during the height of the pandemic.

That said, the US government is worried about red-hot inflation, which hit its highest level since 1982 in February, so there may be no more chance, he suggested.

“But how do you know they won’t? And in the end, you can’t get blood out of a stone,” she said. “If you have overvalued stocks, you’re going to get lousy returns, and we have overvalued stocks, and we’re going to get lousy returns.”

Read more: BlackRock says it still favors stocks despite rampant inflation because ‘tough words from the Fed have little effect’ as strategists at the $10 trillion firm reveal their top 3 investment themes right now.

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