After Jeremy Grantham’s warning, analysts fear more volatility ahead – and will be watching tech’s latest results with interest
www.theguardian.com
*****NOT DIRECTED AT YOU!******
********MERELY USED AS A*********
**SPRINGBOARD FOR COMMENT**
An article from 2015:
For long-term observers of Jeremy Grantham, the chief of GMO LLC and erudite analyst of world investing trends, there’s never a moment when you see Grantham gush about investment trends. There’s a reason why he’s nicknamed the “permabear.”
He’s not a champagne bubbly kind of guy, although he’s warning that if the Federal Reserve keeps rates low, stocks will be in bubble territory at the
S&P 2,250 mark, “based on historical price data only.” We’re not quite there yet. (FYI, the S&P is DOUBLE that today!)
In his most recent quarterly report, for example, he’s uncharacteristically sanguine on the upsurge in U.S. stocks. He likes what he sees in lower oil prices, the labor market and consumer prices. He’s not confident that we’ve reached the peak of the current market cycle.
Last night at Chicago’s Morningstar conference, as in past talks in recent years, Grantham was ever the cautionary Cassandra,
weaving in dire scenarios about climate change, dwindling resources (the end of cheap oil), food shortages, income inequality and the aging of Western countries.
He’s right about all these trends; they don’t bode well for humanity, although he says we can fix most of them.
In Grantham’s long-term forecasts, though, which stretch out seven years (
edit: THAT IS TODAY!!!) ,
big U.S. stocks will barely eke out a gain while the biggest winners are in emerging markets and timber, which is hard for most investors to buy, except indirectly through exchange-traded funds.
While he’s not optimistic that U.S. stocks will continue their bullish ways of late, he points to the Federal Reserve as being the most powerful arbiter of how long the current love affair will last, although slow growth will be the major theme.
“I believe the market will follow the path of least resistance from the Fed,” Grantham said, “at least until the [U.S. presidential] election.” (
That was 5.5 years ago!!)
Well, that’s a pretty safe bet, but what about the Fed’s signals that it will eventually jack up interest rates. Will that end the party?
“In 2004, when rates were raised four times,” Grantham noted, “the market just continued to go up. But there’s always a trigger. In 2008, it was the housing bubble….Then the Fed lowered rates. The Fed drives the world. It’s the ballgame.”
Observing that in the post-Volcker era, bear markets generally last 18 months followed by seven-year bull runs, Grantham doesn’t know when the next trigger will occur, although he says that the run-up in stocks could go on for seven years or so.
When should one pull out of stocks to avoid the fulfillment of Grantham’s fear scenario? He’s not certain, but falls back on safe advice from his favored economist John Maynard Keynes:
“Never be wrong on your own. Make sure you have company. Do what others are doing, but be quicker on the draw.”
Some perspective in here. Who knows where markets will be in 6, 12, 24 months. A lot of people are focused on Russia/Ukraine and you can guarantee a further dip if something big happens. But if it doesnt then then it wont.....
Everyone knows the phrase “Don’t fight the Fed,” but it means different things at different times in different situations.
With the Fed about to raise interest rates, it will hamstring those companies that borrow to grow and can dampen (and even drown) the growth trajectory of some companies/stocks.
However, for those companies with large cash cushions, strong cash flows, and strong balance sheets, THIS IS WHERE THEY SEPARATE THEMSELVES FROM THE HERD. That’s why I have put the vast amount of my money into high quality, well capitalized, strong balance sheet stocks with blue chip management and long term growth credentials and prospects.
Even if the Fed raised rates FOUR TIMES in 2022, REAL rates would still be negative in 3% inflation market.
Anyway, I don’t manage billions of dollars, am not quoted in the press and invited to comment on the markets on TV and do I will merely point out that Mr. Grantham’s prognostications steer to the dire alarmist viewpoint, both frequently and loudly. No one says much when he is wrong, but he will be considered a seer if he “calls it” this time!
That’s some brilliant analysis with over half the NASDAQ in bear market territory already, and markets down 10% after a 30% run last year!
Good luck to us all!
www.nio.com
