Legendary investor Jeremy Grantham warns market conditions are among the worst he's ever seen - and suggests holding cash to ride out the coming storm
- Oops!Something went wrong.Please try again later.
Jeremy Grantham rang the alarm on the current market backdrop and said stocks are still overvalued.
He said holding cash was a good idea, and confirmed he's betting against the Nasdaq and junk bonds.
Grantham was among 6 financial experts sharing their market outlooks with the Wall Street Journal.
Jeremy Grantham has warned investors to prepare for more pain, saying the stage is set for asset prices to keep tumbling.
"This is about as bad a package as we have ever seen," he said about the market's current fundamentals in a recent Wall Street Journal interview for an article in which six financial experts predicted where the markets were heading.
Grantham, who cofounded GMO and is a market historian, noted that stock valuations are still far above historical averages, despite slowing economic growth, rampant inflation, and the Federal Reserve's flurry of interest-rate raises this year.
The Journal reported Grantham had touted holding cash as one of the best options available to everyday investors, given the risk that other assets could plummet in value and not recover for years or decades.
The veteran investor also confirmed he's betting against the Nasdaq index and high-yield or "junk" bonds, suggesting he expects tech stocks to continue dropping, and corporate defaults to spike.
Grantham has been predicting a devastating market downturn for a while. In a research note last August, he warned an epic "superbubble" across stocks, bonds, and housing was on the verge of bursting.
Alongside Grantham, the Journal interviewed five other commentators on their market outlooks.
This is what the others said:
Lloyd Blankfein, the former Goldman Sachs CEO, argued the market is being too pessimistic. He raised the prospect of Russia altering its approach to its war in Ukraine, Saudi Arabia releasing more oil, and the Fed pausing its rate hikes soon. He also recommended investors capitalize on the market downturn this year by buying high-quality stocks they previously considered too expensive.
Rick Rieder, BlackRock's CIO of global fixed income, predicted bonds would rally next year as he believes the inflation threat is fading, and therefore the Fed won't have to hike rates as much as the market expects. Higher rates typically push down bond prices and boost yields.
Rob Arnott, the founder of Research Affiliates, said stocks still look expensive compared to their valuations during past crises, so he doesn't believe markets have bottomed out yet.
Nancy Davis, the founder of Quadratic Capital Management, warned investors are being too blasé about inflation, and underestimating the risk that it remains elevated.
Paul Britton, the founder of Capstone Investment Advisors, suggested markets will remain volatile, and advised investors to diversify their portfolios beyond stocks and bonds
Read the original article on Business Insider
