Jeremy Grantham Thinks Stocks Could Move Up Another 20-30%

By on November 19, 2013

Jeremy Grantham - GMOAlthough he believes prudent investors should forego attempting to catch the tail end of this bull market, GMO’s Jeremy Grantham believes stocks have further to run to the upside.

Grantham states in his latest letter [see link below for full letter – available with free registration]:

“My personal guess is that the U.S. market, especially the non-blue chips, will work its way higher, perhaps by 20% to 30% in the next year or, more likely, two years, with the rest of the world including emerging market equities covering even more ground in at least a partial catch-up.”

However, he believes this will lead to a devastating bear market:

“And then we will have the third in the series of serious market busts since 1999 and presumably Greenspan, Bernanke, Yellen, et al. will rest happy, for surely they must expect something like this outcome given their experience”

Grantham saves this warning for the prudent amongst us:

“In the meantime investors should be aware that the U.S. market is already badly overpriced – indeed, we believe it is priced to deliver negative real returns over seven years – and that most foreign markets having moved up rapidly this summer are also overpriced but less so. In our view, prudent investors should already be reducing their equity bets and their risk level in general.”

Back in May, in an interview with Charlie Rose, Grantham said equities in the U. S. were priced to generate zero returns in the future, but investors could expect positive returns from U. S. high quality and emerging market stocks [link].

Source: GMO

One Comment

  1. Milton the Moron

    November 22, 2013 at 3:53 pm

    After reading the entire longwinded prose of JG I find it interesting he dares make a prediction given his convoluted thinking about bubbles and their causes. A market bubble occurs when all moorings regarding valuation are broken, in fact, totally smashed. Stocks could go to 50-100 times earnings when the environment gets completely whacky. Bears capitulate en masse (see Hugh Hendry at Zero Hedge today). It is impossible to predict where this ends. The Dow could end up at 30,000 for all anyone knows!

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