Jeremy Grantham, a legendary investor, recently warned that the US stock price is outrageously high and may be in trouble. The current hot AI is a foam destined to burst, and the economy will suffer a slight recession, or even worse.
During a media interview, Graham, a long-term investment strategist at GMO, gave his investment advice that it is best to avoid US stocks at the moment. "Compared to other parts of the world, the prices of US stocks can be said to be outrageously high."
Grantham suggests that investors look for undervalued assets in emerging markets such as Japan and in sluggish industries such as natural resources.
He added that the US stock market will experience a difficult year, with US companies having historically high profit margins compared to foreign competitors, which poses a "double danger" situation for stocks.
Grantham is famous for predicting the economic recession in 2000 and 2008. At the beginning of 2022, he warned the market of a "super foam". That year, the S&P 500 index plummeted 19%, and the NASDAQ composite index, dominated by technology stocks, plummeted 33%.
In 2023, Grantham remains pessimistic about the market as the US economy is highly likely to enter a recession and the US stock market may continue to decline, but his predictions have not been fulfilled.
Grantham has provided his latest explanation, stating that without the wave of artificial intelligence, the stock market could have fallen another 20% or 30% in 2023. It is the emergence of artificial intelligence that has changed the entire market trajectory.
This senior investor stated that artificial intelligence is not a scam, but he predicts that the "incredible excitement" surrounding artificial intelligence will not continue indefinitely. Although in the coming decades, it may bring revolutionary subversion like the Internet.
As usual, Grantham believes that Bitcoin is in the midst of a foam, or even a hoax. But earlier this year, the US Securities and Exchange Commission (SEC) approved the first batch of US Bitcoin ETFs, hailed by the cryptocurrency community as a game changing move that allows mainstream investors to buy and sell Bitcoin as easily as buying and selling stocks and mutual funds.
In terms of the economy, Grantham made a pessimistic prediction, despite the initial recorded growth of 3.3% in the annualized quarterly real GDP rate in the fourth quarter of the United States, a full year economic growth rate of 2.5% in 2023, and the Federal Reserve's upcoming interest rate cut cycle.
He said that the economy will become weaker, and we will at least experience a mild recession. The inverted yield curve and continuous decline in leading economic indicators indicate future troubles.
Gransom also pointed out the threat posed by the conflict between Ukraine and the Middle East, warning that war could fuel a terrifying geopolitical context like hell, in which certain bad things could happen. He added that this background is particularly concerning when assets are at record high levels.
Grantham added: "What I am good at is not analyzing foam, but studying long-term, underestimated negative factors. My God, there are too many risk factors now."