Jeremy Grantham has a reputation as one of the investment world's best forecasters. The co-founder of GMO, which manages more than $120bn, was alert to the housing bubble "a train wreck in very slow motion", he called it and also pinpointed the turn of the US stockmarket in March 2009.
Having spent much of his time studying bubbles, he has concluded that "despite brutal and widespread asset overpricing", US stocks haven't quite reached bubble territory; that would imply a level of around 2,300 in the S&P 500 index. And while he believes that this central-bank-induced market rebound looks due for a substantial fall in the next few years, for now he expects "it will hang in or better at least through the election".
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Nor is sentiment wildly bullish, as it typically is before big declines, such as the 50% falls in 1972, 2000 and 2007. There could well be "an ordinary bear market of 10% or 20%", but a "serious decline" is unlikely for now. So while the next president will face a daunting array of problems, a market collapse is probably not going to be among them.
The bigger question, however, is what will ultimately happen now that central banks have driven interest rates down to zero and beyond, an unprecedented situation whose long-term consequences are impossible to predict. "We live in interesting times."
-
Steve Webb: The triple lock is there to do a job. I’m not embarrassed or ashamed of itThe triple lock means 13 million pensioners will now get an above-inflation state pension boost in April. While the rising cost of the policy has stirred controversy, Steve Webb, who served as pensions minister when it was introduced, argues the triple lock is vital and should stay. Webb speaks to Kalpana Fitzpatrick on the new episode of MoneyWeek Talks – out now.
-
How retirement pots risk running out 11 years early if inflation remains highPension savers could find their retirement income may not last as long as they anticipated over fears that inflation may not slow down
