• Jeremy Grantham pessimistic about 2023
• S&P 500 should fall again in double digits
• Much uncertainty in the stock market
The stock market year 2022 was one to forget. For example, the S&P 500, which reflects the broad US stock market, lost around 19 percent in value. But investors hoping the new year will be better may be disappointed, according to Jeremy Grantham.
In the meat grinder
According to “MarketWatch”, the stock exchange expert has published an article with the meaningful title “After a timeout – back into the meat grinder”. “The first and simplest phase of the stock market bubble bursting that we predicted a year earlier has come to an end,” wrote the famous co-founder of the investment firm GMO.
Now that significant parts of the expected losses have occurred, things are getting more complicated. Although the “most extreme foam” has now been removed from the market, the ratings are still well above the long-term average. This does not bode well, as Grantham noted that historically markets have tended to overreact, falling below the long-term trendline as fundamentals deteriorate.
S&P 500 falls again
According to the stock expert, the S&P 500 could fall to around 3,200 points by the end of 2023. Compared to the closing level of 2022 at 3,839.50 points, this would correspond to a decrease of almost 17 percent. The index will probably stay below this level for some time this year or next. While this move wouldn’t be the end of the world, it’s pretty brutal compared to the previous multi-year bull market, Grantham said.
High uncertainty
Grantham also said that while he believes another stock market downturn is highly likely, there is a lot of uncertainty as to the timing and magnitude. A number of factors, including the continued strength of the labor market and the reopening of the Chinese economy, could pause or delay the bear market. How things develop over the next twelve or 18 months would largely depend on the company’s fundamentals.
Looking at the big picture, long-term population decline, resource shortages, and damage from climate change are beginning to weigh heavily on growth prospects. The geopolitical shocks of the past year will only compound these problems, Grantham warned.
Famous pessimist
The Boston-based GMO is considered extremely cautious when it comes to investing. As a result, the gloomy forecasts of the investment company are now often only acknowledged by many market participants with a rolling of their eyes. And indeed, the pessimistic forecasts have not always come true. On the other hand, GMO was one of the few companies that predicted the stock market crashes of 2000-2003 and 2007-2009. Back then, too, skeptics had laughed at the naysayers about GMO.
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