Yahoo Finance: GMO's Jeremy Grantham Warns: The Stock Market is in a 'Fully-fledged Epic Bubble'

Article by Ines Ferré in Yahoo Finance

“The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble,” says GMO’s co-founder Jeremy Grantham.

“Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history,” wrote the investor.

He compares this period to the South Sea bubble, the 1929 market crash, and the dot-com boom of 2000.

“These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part,” he wrote.

He warns the bubble will burst in due time, “no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios.”

Grantham predicts the longest this bubble might survive is the late spring or early summer, which would coincide with the broad rollout of COVID-19 vaccines.

“At that moment, the most pressing issue facing the world economy will have been solved. Market participants will breathe a sigh of relief, look around, and immediately realize that the economy is still in poor shape, stimulus will shortly be cut back with the end of the COVID crisis, and valuations are absurd,” he wrote.

Grantham predicts the longest this bubble might survive is the late spring or early summer, which would coincide with the broad rollout of COVID-19 vaccines.

“At that moment, the most pressing issue facing .... 

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