GMO co-founder Jeremy Grantham says a stock market crash and recession is not far away. Daniel Acker/Bloomberg – Getty Images
A legendary investor who specializes in big stock market crashes says the market is headed for a bubble burst similar to the crises seen in 1929 and 2000.
British billionaire Jeremy Grantham is the co-founder of GMO, an investment management firm with nearly $65 billion in assets.
Grantham, whose fortune is estimated at $1 billion, previously estimated an 85% chance of a stock market crash, but has since lowered that to 70%.
Despite the lower numbers, Grantham believes markets have created the perfect storm for a bubble to burst, such as asset prices, but the advent of artificial intelligence is slowing the bubble from bursting. Stated.
Grantham, who specializes in long-term investment strategies, said in an interview with WealthTrack over the weekend that equities have benefited from a “near-perfect” environment for nearly a decade.
“I’m only interested in really great bubbles like 1929, 2000 and 2021. [which] Three senior bubbles in the US stock market. We ticked all the boxes pretty well,” he said.
Grantham, who now heads a family foundation under his own name that specializes in green investing, said those “boxes” were periods of prolonged economic upswings, strong bull markets and strong earnings.
In each of these scenarios, the market subsequently suffered a “precipitous drop,” Grantham said.
In 1929, on Black Thursday, $14 billion was wiped from the market in one day. In 2000, the Nasdaq lost 76.81% of its value in less than two years, and suffered a similar 10% hit in 2021.
Grantham said his predictions for the pre-crash rally were “all there and right,” noting that the S&P 500 index was up 20% in June from its October lows.
Grantham’s pessimistic predictions have proven to be correct.
Two years ago, Mr. Grantham similarly said that the “magnificent” scale was due to extreme prices in various markets, including the housing market, the “memetic” stock market, and the bond market, which was trading at extremely low prices. told Wealthtrack that he expects a bubble of
A year later, many of these assets experienced significant corrections, with meme-motivated stocks like theater company AMC experiencing significant declines by the summer.
The effects of such an implosion could range from the devastation of the 1929 crash to the “respectable” recession of 2000, Grantham questioned. How much will the profit margin fall?
“They’re already down quite a bit, but they could get even worse. And how badly other economic variables will get, like problems in global trade, problems with China, war problems. How will it play out? It’s very difficult to tell.”
Grantham said he was “disturbed” by the emergence of the so-called mini-bubble, inflated as a result of tech disruptors.
Companies like Microsoft that mentioned the phrase “artificial intelligence” 50 times in their April earnings calls saw their stocks soar.
Meta has enjoyed similar benefits, with CEO Mark Zuckerberg’s fortune jumping nearly $40 billion thanks to his stake in the platform since announcing it would focus on AI products and services from the Metaverse. .
Grantham said he wasn’t sure at the moment whether AI would be “fast enough and strong enough” to prevent a market bubble from bursting.
The investment expert said the emergence of technologies like ChatGPT was the reason he lowered his prediction of an “absurdly high” 85% chance that the market would explode to 70%.
But he countered that AI gatherings are a niche market, explaining: How fast will inflation, the Fed, interest rates go, how far will they go, what will the war be like, it goes on and on.
“Since ChatGPT and October/November of last year, there has been a very intense and renewed interest.”
How much technology will change the course of the market depends on who you ask, Grantham said, adding that there is a “scramble” of opinions about how technology will affect society.
“Some of the smartest people on the planet say that’s utter nonsense and parrots are just learning by trial and error. Everything changes and productivity doubles.” , and some say it doubles everything in between,” Grantham said.
Grantham’s guess is that AI isn’t working on the same timescale as the near-term bubble he predicts. Margin and some grief in the stock market. You can do it before the real impact of AI is seen. “
#GMOs #Jeremy #Grantham #chance #stock #market #crash