12/19/2023 0 Comments Jeremy grantham super bubbleIn his paper Wednesday, Grantham said “the current superbubble features an unprecedentedly dangerous mix of cross-asset overvaluation (with bonds, housing, and stocks all critically overpriced and now rapidly losing momentum), commodity shock, and Fed hawkishness.” market approaches end of ‘superbubble,’ says Jeremy Grantham See: ‘Good luck! We’ll all need it’: U.S. was approaching the end of a “superbubble” spanning across stocks, bonds, real estate and commodities following massive stimulus during the COVID-19 pandemic. Grantham had warned in a January paper that the U.S. stock market remains very expensive and an increase in inflation like the one this year has always hurt multiples, although more slowly than normal this time,” Grantham said. “But now the fundamentals have also started to deteriorate enormously and surprisingly: Between COVID in China, war in Europe, food and energy crises, record fiscal tightening, and more, the outlook is far grimmer than could have been foreseen in January.” He warned that the Fed would battle inflation until the job was done, even as it may bring pain to households and businesses. 26 speech at the Jackson Hole, Wyo., economic symposium, wiping out this month’s gains as he reiterated that the central bank would keep tightening its monetary policy to tame soaring inflation. The S&P 500 closed at a low this year of 3,666.77 on June 16, before surging over the summer along with other stock benchmarks amid investor optimism over signs that the highest inflation in decades was easing.įed Chair Jerome Powell recently ended that rally with his Aug. stock market tumbled during the first half of 2022 as investors anticipated soaring inflation would lead to a hawkish Federal Reserve. This summer’s rally has so far perfectly fit the pattern.” “This, in all three previous cases, recovered over half the market’s initial losses, luring unwary investors back just in time for the market to turn down again, only more viciously, and the economy to weaken. “One of those features is the bear-market rally after the initial derating stage of the decline but before the economy has clearly begun to deteriorate, as it always has when superbubbles burst,” said Grantham.
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