![]() ![]() Matthew Lloyd/Getty Images for ReSource 2012 Jeremy Grantham, co-founder of hedge fund GMO, is warning that stocks could fall a lot further. “One of the main reasons I deplore superbubbles – and resent the Fed and other financial authorities for allowing and facilitating them – is the under-recognized damage that bubbles cause as they deflate and mark down our wealth,” he wrote. The Fed is widely expected to begin raising rates at its March meeting. Grantham believes that the Federal Reserve’s moves to cut rates to zero – and then keep them there for nearly two years – is a main cause for the market’s current frothiness. “For bubbles, especially superbubbles where we are now, are often the most exhilarating financial experiences of a lifetime.” It is the worst kind of party-pooping,” Grantham wrote. “In a bubble, no one wants to hear the bear case. Many investors don’t want to believe that the stock market is overdue for a broader pullback, Grantham argues, especially since the market fell into bear territory – albeit briefly – in March 2020 at the pandemic’s start. “All five of these superbubbles corrected all the way back to trend with much greater and longer pain than average,” Grantham wrote. (Photo by Chip Somodevilla/Getty Images) Chip Somodevilla/Getty ImagesĢ022 hasn't been good for stocks. With his approval rating hovering around 42-percent, Biden is approaching the end of his first year in the Oval Office with inflation rising, COVID-19 surging and his legislative agenda stalled on Capitol Hill. President Joe Biden delivers an opening statement during a news conference in the East Room of the White House on Januin Washington, DC. He also said the US housing market was a “superbubble” in 2006 and that the 1989 Japanese stock and housing markets were both “superbubbles.” He noted that US stocks have experienced two such “superbubbles” before: 1929, a market fall that led to the Great Depression, and again in 2000, when the dot-com bubble burst. “Good luck! We’ll all need it,” said Grantham, whose firm manages about $65 billion in assets. Grantham, who has been running the firm’s investments since it was started in 1977, was similarly bearish at market tops in 2000, and during the Great Financial Crisis of 2008. Jeremy Grantham, co-founder and chief investment strategist of Grantham, Mayo, & van Otterloo (GMO) said in a report called “Let the Wild Rumpus Begin” that stocks are now in the midst of a “superbubble,” that it won’t end well. And if one the most influential hedge fund managers is to be believed, this could be only the beginning of a very painful time for investors. The tech-heavy Nasdaq is already in a correction, a more than 10% drop. Stocks are off to a tough start this year. ![]()
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