- Jeremy Grantham issued a dire warning about the US stock market and economy this week.
- Stocks will decline despite the AI discussion, he said, and there is a 70% chance of a recession by early 2025.
- Grantham touched on meme stocks, banking risks, real estate, commodities and Elon Musk’s Tesla.
Jeremy Grantham has sounded the alarm on US stocks, warning that the economy could slip into recession by as early as 2025, and cautioning that problems could arise in the financial system.
The GMO co-founder and long-term investment strategist also reflected on his unwitting investment in meme stocks, advised against buying real estate or commodities, and praised Elon Musk’s Tesla and other companies fighting climate change.
Grantham was speaking at an investor event hosted by Livewire Markets in Sydney this week. Here are his 10 best quotes, lightly edited for length and clarity:
1. “I don’t think we’re in a new bull market. There’s never been a bull market in history that started with prices this high – and quite frankly, it’s not even close. But will we go straight to The bottom line, and how badly, is a more interesting issue.”
2. “A dozen huge US stocks have been hit hard by AI, and it’s certainly given the impression that the game is over. The problem is that prices are incredibly high and basically the economy is starting to unravel.” .So it’s a fake head, but it’s absolutely a fake head.”
3. “The US equity market, led by growth stocks, became a frenzy of memes and madness, which coincidentally led to the biggest investment I ever made in a startup, QuantumScape. It came in the form of a SPAC, which I hate. , I think it should be illegal for them to do that. This company that had a product four years ago – forget profits or sales – was selling at more than General Motors or Panasonic. Nothing on that scale in 1929 or 2000. It was probably one of the great betting events of all time.”
4. “I would be very careful with real estate. Around the world, the decline in mortgage rates over the last 20 years has led real estate to really crush high multiples of family income, so much so that young people are not buying homes. So I won’t touch real estate.”
5. “I’m very nervous about the economy. I’m very nervous about a potential financial crisis.”
6. “I like climate-change stocks. They’ll have incredible top-line revenue growth, which will lead to something like Tesla and electric vehicles versus dopey VW and old-fashioned cars. This is the area where the wind is in your favor, and It would be a terrible mistake to fight it.”
7. “It’s woken everyone up, and it was like dealing with sleepwalkers before that. When you see something terrible coming through the pipeline and no one is taking it seriously, it’s like a nightmare.” That phase is over at least.” (Grantham was welcoming of the growing awareness and acceptance of climate change.)
8. “It will dominate your portfolio for the rest of your life. It doesn’t mean there won’t be financial problems, it doesn’t mean there won’t be bubbles. But it will be the area of the economy that drives more than anything else.” Development.” (Grantham was referring to companies working to combat climate change.)
9. “Keep in mind, keeping everything in check is a royal pain in the ass as there are completely unexpected and shocking drops along the way.”
10. “The Fed and the economic establishment, the financial establishment, they have always underestimated the likelihood of a recession. They always say everything is going to be OK. It’s not unusual, it’s absolutely inevitable, and here they go again. It Would be unique if we had no extended problems with the economy.
(Grantham pegs the probability of a recession over the next 18 months at about 70%.)