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Historic collapse in stocks underway; Fed intervention can’t prevent eventual plunge: Jeremy Grantham

Bloomberg
Bloomberg1/21/2022 4:18 PM GMT+08  • 4 min read
Historic collapse in stocks underway; Fed intervention can’t prevent eventual plunge: Jeremy Grantham
Grantham is a dyed-in-the-wool value manager who’s been investing for 50 years and calling bubbles for almost as long.
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Jeremy Grantham, the famed investor who for decades has been calling market bubbles, said the historic collapse in stocks he predicted a year ago is underway and even intervention by the Federal Reserve can’t prevent an eventual plunge of almost 50%.

In a note posted Thursday, Grantham, the co-founder of Boston asset manager GMO, describes US stocks as being in a “super bubble,” only the fourth of the past century. And just as they did in the crash of 1929, the dot-com bust of 2000 and the financial crisis of 2008, he’s certain this bubble will burst, sending indexes back to statistical norms and possibly further.

That, he said, involves the S&P 500 dropping some 45% from Wednesday’s close -- and 48% from its Jan. 4 peak -- to a level of 2500. The Nasdaq Composite, already down 8.3% this month, may sustain an even bigger correction.

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