“The current superbubble presents the most dangerous combination in modern times: the three main asset classes: housing, stocks and bondswere historically critically overvalued at the end of last year,” the manager explained in a note to clients, according to Investing.
According to Grantham, previous ‘super bubbles’ intensified when multiple elements were affected at the same time. Like in Japan in 1989, with houses and stocks.
“Now we are also seeing a rise in inflation and a rate shock like in the early 1970s. And to make matters worse, we have a rise in raw materials and energy, as was painfully seen in 1972 and in 2007, and these commodity shocks have always cast a long shadow suppresses growth“, he indicated.
“If history repeats itself, the play will once again be a tragedy. Hopefully this time it will be less. Each cycle is different and unique, but each historical parallel suggests that the worst is yet to come.”
Since January of this year, Grantham has argued that the fourth bubble in the last hundred years was about to burst. His projection points to a 50% drop in the S&P 500. Which for now has not been complicated. The index lost just over 20% in June, when it fell into bearish territory.
Source: Ambito
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