The End or The Beginning?
Jeremy Grantham heads the Boston based investment manager GMO with over $115 billion under management. We have quoted him here before because he has presciently called some of the defining market crashes of our time including the end of the dotcom boom and the GFC. As an aside your author also called those two but success was probably the result of forecasting often rather than accurately.
According to reports in the Financial Times (FT), Grantham is now predicting that in 2016 the markets will be “ripe for a major decline”. He has also intimated that government bankruptcies may define the next sell off.
More specifically Grantham, according to the FT, “expects the stock market to continue to march higher in the coming year, eventually sucking in retail investors and setting up a serious decline around the time of the US elections in late 2016.”
According to the FT, “Given that central banks were able to create money to recapitalise themselves, this “could be a crisis we could weather”, Mr Grantham said. “If not, then we’re talking the 1930s, where you have a chain-link of government defaults.”
“Unlike many asset managers or analysts, Mr Grantham does not fret greatly over the impact of the Federal Reserve lifting interest rates for the first time in almost a decade this year. He points out that the US central bank lifted interest rates 13 times between 2004 and 2006 without troubling the ebullience of the time.”
“We might have a wobbly few weeks when they do move…and the markets will settle down, and most probably go to a new high.” However, this will draw in retail investors … push the S&P 500 into valuations that are two standard deviations away from the long-term norm by the time of the US elections, which Mr Grantham classified as a bubble.”
Financial Times subscribers can read the full article here.
Roger Montgomery is the founder and Chief Investment Officer of Montgomery Investment Management. To invest with Montgomery domestically and globally, find out more.
Roger Montgomery is the Founder and Chairman of Montgomery Investment Management. Roger has over three decades of experience in funds management and related activities, including equities analysis, equity and derivatives strategy, trading and stockbroking. Prior to establishing Montgomery, Roger held positions at Ord Minnett Jardine Fleming, BT (Australia) Limited and Merrill Lynch.
This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.
Robert
:
Hi Roger,Did you get my post when I signed up about the Cassandra syndrome etc?
In last 24 hrs I have heard a lot of chatter from the tennis court to the sailing club. Nothing is nice.
My South African mate said quote ” australia not a good place to be right now”
Another mate US plastics industry said I quote ” I am hunkering down to let the tornado come and pass. I hope there is not too many”
The place is progressively becoming awash with negativity. As a strong hopefully not foolishly optimistic person that thrives on the innovatiive , entrepreneurial enterprise of humanity this time I am hearing very strong negativity. The storm or tornado could be a ” mother of all mothers”
Your ABC Business appearances have been terrific particularly over the last 2 years very honest and periodically ” canary in the mine warnings” I have heeded. Any advice will sax go to 4000 by years end and property subdue in rate of increase? If so is under the bed for cash an option on the table?
Roger Montgomery
:
Cash is avery good options Robert. Thank you for your encouraging words and for those anecdotes.
Peter Todd
:
So are you still dancing close to the door Roger or have you moved out to the car park?
Roger Montgomery
:
Still toe-tapping at the exit. The band appears to still be playing.
Hedley Calvert
:
I’ve read so many forecasts over the years and always ask myself are they right or are they wrong? Should I sell or do nothing? should I be worried or simply have another glass of wine? In the end scratch my head or shrug the shoulders and forget about it…..and I think that’s a good thing. As long as I own great companies (and the wine is half decent) I can sleep at night without worrying about tomorrow or the day after. I’m content with that.
Roger Montgomery
:
So Hedley, I think your saying it’s the quality and the quantity of the wine that determines your ability to weather the inevitable volatility.