Veteran investor Jeremy Grantham warned investors during an Bloomberg interview that federal aid is seeking $ 1.9 trillion from Congress in President Joe Biden, adding to the stock market bubble.
The GMO co-founder told Eric Schatzker that he “has no doubt” that some stimulus aid will end up in the market. He said the “sad truth” about the final stimulus bill passed in 2020 was that it did not increase capital expenditure and increased real output, but it certainly flowed into stocks.
The plan Biden is proposing includes incentive checks, strong state and local aid, and $ 1,400 in vaccine-delivery funds. Grantham said that if the package was passed, it would cost $ 1.9 trillion, which could lead to a dangerous end to the bubble.
Grantham said, “If it is as big as they talk, then it would be great for the market, to enjoy the history books.”
“We’ll have a few weeks of extra money and a few weeks of putting our last, desperate chips in the game and then another great stir,” he said.
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Grantham has long warned of balloons being seen on the US stock market. In his Investor Approach letter in early January, he elaborated on how overvalued, explosive price rises, frenzied issuances, and “hysterically speculative investor behavior” all demonstrate that the stock market is in a bubble that the Fed. Can not stop it from bursting.
“When you’ve reached this level of apparent super-enthusiasm, the bubble always breaks, without exception, over the next few months,” Grantham told Bloomberg.
Grantham also said that a combination of fiscal stimulus and emergency Fed programs helped raise the bubble that could lead to an increase in inflation.
Grantham said, “If you think you live in a world where output doesn’t matter and you can just make paper, you’re going to do the soon or impossible thing, and it will bring inflation back. ” “Interest rates are paper. Credit is paper. Real life is factories and workers and output, and we are not seeing increased production.”
He asked investors to look for stocks outside the US markets, as many other countries have not seen the big bull market in the US. He called the shares of emerging markets “beautiful prices”.
“You won’t give 10 or 20 years of returns from US growth stocks,” Grantham said. “If you can do in emerging, under-development and green, you can get a jackpot.”
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