Reliable market predictor says shares to fall. Jeremy Grantham

June 12, 2020

5/June/2020 Jeremy Grantham

  • we are in the top 10% of historical price earnings ratio for the S&P on prior earnings and simultaneously are in the worst 10% of economic situations, arguably even the worst 1%!  ..... This is apparently one of the most impressive mismatches in historywe have never lived in a period where the future was so uncertain.  the current market seems lost in one-sided optimism when prudence and patience seem much more appropriate.

  • Simultaneously, it is causing supply and demand shocks unlike anything before. Ever.
    It is generating a much faster economic contraction than that of the Great Depression.
    And unlike 1989 Japan, 2000 Tech (U.S.), and 2008 (U.S. and Europe), it is truly
    global. The drop in GDP and rise in unemployment in four weeks have equaled what
    took one to four years to reach in the Great Depression and were never reached in the
    other events. Rogoff & Reinhart, Harvard Professors who wrote the definitive analysis
    of the 2008 bust, agree that this event is indeed completely different and suggest it
    will take at least 5 years to regain 2019 levels of activity
    . But this is a guess. We really
    don’t know how long it will take. Nearly certain is that a V-shaped recovery looks like a
    lost hope
    .

  • The best possible outcome would be that there will be, almost miraculously,
    billions of doses of effective vaccine by year-end. But most viruses have never had a
    useful vaccine
    and most useful vaccines have taken well over five years to develop and
    when developed have been only partially successful
    .

  • Unanticipatable outcomes seem to be guaranteed.

  • This could turn out to be a fulcrum, or tipping point, for new social and business trends: deficiencies in capitalism; inequality; climate change and our environment: limited resources in a finite world; our current high consumption economy; growth at any price.

 The Inker Grantham US share market model is forecasting that the share market will fall.

 

http://puzzlefinancialadvice.com.au/2020/Articles/Grantham_market_vs_economy_200605.pdf

 

https://www.gmo.com/australia/research-library/1q-2020-gmo-quarterly-letter/

 

 

 

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