Investor legend Jeremy Grantham is known for his gloomy market forecasts. But now one of his colleagues at the investment firm GMO has struck a more conciliatory tone and praised the stock market.
• Star investor Jeremy Grantham is pessimistic as usual
• One of his GMO colleagues, however, sees a significantly improved environment
• Good prospects for investors
The Boston-based GMO is considered extremely cautious when investing. As a result, the investment company’s gloomy forecasts are now often only met with a roll of the eyes by many market participants. And in fact, the pessimistic predictions have not always come true. But 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 laughed at the pessimists about GMO.
In 2023, Jeremy Grantham once again made gloomy predictions. The co-founder and long-term investment strategist at GMO repeatedly warned of a “super bubble” that extends across several asset classes. In this context, he stated that he expects the S&P500 to drop to 3,200 points, or if some things go wrong, even to 2,200 points. The index, which reflects the broad US stock market, is currently at 4,740.56 points (closing level on December 18, 2023)
Grantham colleague is more optimistic
Given Grantham’s continued bearish stance, it is all the more surprising that Ben Inker, Co-Head of Asset Allocation at GMO, recently appeared significantly more optimistic than Grantham. In his opinion, the prospects for investors are currently pretty good, “regardless of whether you want to buy an equity portfolio, a fixed-income portfolio or a diversified portfolio of different assets,” he says from “Markets Insider” with reference to the Morningstar podcast “The Long View” quotes.
As Inker pointed out, investors in various parts of the world “get paid quite well for taking risks.” In addition, safe investments such as government bonds and cash would also offer significantly higher returns than in previous years, giving investors more opportunities to generate returns.
Inker: US stocks have become cheaper
According to Ben Inker, the fair value of US stocks has increased over the past two years. On the one hand, this is due to strong inflation, because the prices of the goods produced and services provided by companies have risen. On the other hand, the fair value was also driven by the US economic growth of the last two years, because public companies generally grow with the economy, according to the GMO expert.
As a result, he now rates US stocks as “significantly better than they were a few years ago.” In his opinion, the cheapest 20 percent of stocks are “probably cheap in absolute terms,” says Inker.
Editorial team finanzen.net