‘Good luck! We’ll all need it’: U.S. market approaches end of ‘superbubble,’ says Jeremy Grantham

[libertybele]

‘Good luck! We’ll all need it’: U.S. market approaches end of ‘superbubble,’ says Jeremy Grantham

The U.S. is approaching the end of a “superbubble” spanning across stocks, bonds, real estate and commodities following massive stimulus during the COVID pandemic, potentially leading to the largest markdown of wealth in its history once pessimism returns to rule markets, according to legendary investor Jeremy Grantham.

“For the first time in the U.S. we have simultaneous bubbles across all major asset classes,” said Grantham, co-founder of investment firm GMO, in a paper Thursday. He estimated wealth losses could total $35 trillion in the U.S. should valuations across major asset classes return two-thirds of the way to historical norms.

“One of the main reasons I deplore superbubbles — and resent the Fed and other financial authorities for allowing and facilitating them — is the underrecognized damage that bubbles cause as they deflate,” said Grantham.

The Federal Reserve doesn’t seem to “get” asset bubbles, said Grantham, pointing to the “ineffably massive stimulus for COVID” (some of which he said was necessary) that followed stimulus to recover from the bust of the 2006 housing bubble. “The only ‘lesson’ that the economic establishment appears to have learned from the rubble of 2009 is that we didn’t address it with enough stimulus,” he said.

Equity bubbles tend to begin to deflate from the riskiest parts of the market first — as the one that Grantham is warning about has been doing since February 2021, according to his paper. “So, good luck!” he wrote. “We’ll all need it.”

While the S&P 500 index SPX, -1.89% and Dow Jones Industrial Average DJIA, -1.30% each notched all-time closing peaks in early January, they’ve since fallen into a slump, along with the Nasdaq Composite Index COMP, -2.72%, as investors anticipate the Fed will end quantitative easing and begin raising interest rates to combat high inflation later this year.................

https://www.marketwatch.com/story/good-luck-well-all-need-it-u-s-market-approaches-end-of-superbubble-says-jeremy-grantham-11642723516?mod=home-page

[IsailedawayfromFR]

The spectacular meltdown in equities and bonds will be the direct result of overpumping of the economy by stimulus payments and the atrocious behavior of the Fed buying up debt.

The debt happened not from low taxation but from overspending.  This will get worse rather than better as interest rates rise and the US debt hemorrhages the economy.

Batten down the hatches as the next few years will not be pretty.

[roamer_1]

The spectacular meltdown in equities and bonds will be the direct result of overpumping of the economy by stimulus payments and the atrocious behavior of the Fed buying up debt.

The debt happened not from low taxation but from overspending.  This will get worse rather than better as interest rates rise and the US debt hemorrhages the economy.

Batten down the hatches as the next few years will not be pretty.

My only argument with your words would be... Nowhere near enough emphasis.

[Hoodat]

Batten down the hatches as the next few years will not be pretty.

I truly believe that our government lacks the capacity for any such austerity measures.  The only conclusion I see here is Saudi Arabia transferring its oil exchange from the US dollar to the Swiss franc, pound Sterling, or Japanese Yen.  At which point the world will be flooded with an ocean of unwanted dollars, and US inflation will approach triple digits.  Huge swaths of the US will be sold off to foreign interests, and the US becomes Portugal.