Even though the S&P 500 has had a poor start to the year, Jeremy Grantham thinks there will be more declines.
"It's likely that there will be considerably more pain before this is over," he said in an interview with the Associated Press.
If Grantham is correct, the S&P 500 will have another 25% drop from current levels.
There is a chance that things will get worse from there.
The market is free to go below fair value. It should be able to spend several months below 3000.
It is hard to say when the market downturn will end.
It can be quick. It took three years to draw out in 2000. He said that it was not possible to know if it would be short or long.
Corporate earnings will fall as recession fears and interest rates rise, which will cause stocks to fall.
Since last year, he has argued that the U.S. stock market and the housing market are in a "super bubble".
He said this week that there was a perfect environment for speculating in 2020 and 2021.
This speculation will turn out to be very expensive for investors who bought in, as once high-flying stocks have retreated to more reasonable valuations.
People were at home and bored out of their minds, so why not speculate? He said that the kind of investing that they found on the web was expensive for most people. Money tends to move from the amateur to the professional.
As retirees have already benefited from the rise in the stock and real estate markets, and younger workers will have time to watch their portfolios rebound, mid-career professionals are likely to be hurt the most.
The compounding effect will be greater than the pain on your portfolio if you have another thirty years. Maybe a lot larger. He said that the younger you are the more you should be happy with a market decline.
The British investor has become famous for some prescient predictions despite being known for his pessimistic economic views on Wall Street.
An international credit crisis would cause the U.S. housing market to break, corporate profit margins to sink, and stocks to collapse in an article written for Fortune.
He was correct in his opinion. After his Fortune article was published, the U.S. housing market broke and the Great Financial Crisis began.
Even a broken clock is right twice, according to some Wall Street analysts.
The British investor has been correct more than once. He saw the dot-com bubble in 2000. He says the stock market's "super bubble" is worse than the tech stock bubble of 2000.
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