Jeremy Grantham Warns of a 17% Plunge in the S&P 500 This Year
Comment of the Day

January 25 2023

Commentary by Eoin Treacy

Jeremy Grantham Warns of a 17% Plunge in the S&P 500 This Year

This article from Bloomberg may be of interest to subscribers. Here is a section: 

Grantham views the process of further stock market pain playing out now as similar to the popping of bubbles following other rare “explosions of investor confidence” such as in 1929, 1972 and 2000. While many are attributing last year’s slide in stocks to the war in Ukraine and the surge in inflation, or reduced growth from Covid-19 and ensuing supply chain problems, Grantham believes the market was due for a comeuppance regardless.

While the first and “easiest” leg of the bubble’s bursting is over, Grantham says that the next phase will be more complicated. Seasonal strength in the market in January and during the current period of the presidential cycle could keep the market buoyant in the early part of the year. “Almost any pin can prick such supreme confidence and cause the first quick and severe decline,” he wrote. “They are just accidents waiting to happen, the very opposite of unexpected. But after a few spectacular bear-market rallies we are now approaching the far less reliable and more complicated final phase.”

Eoin Treacy's view

I was at dinner last night with some very successful elderly investors who chastised me for being too bearish. Their contention was that the lows were posted in October and the market always bottoms ahead of earnings. So let’s consider the argument that the October nadir is unlikely to be exceeded. 

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