Jeremy Grantham has been predicting epic market crashes for a decade. Here's why he could be wrong again.

Jeremy Grantham has been predicting epic market crashes for a decade. Here's why he could be wrong again.
Jeremy Grantham is highly regarded in markets as a value investor.Boston Globe/Getty Images
  • Jeremy Grantham last week predicted a US "superbubble" will pop soon, causing an epic stock-market crash.
  • Yet the legendary investor has been calling for a crash for more than a decade, and none has yet come.

Legendary investor Jeremy Grantham has been the talk of Wall Street this week after saying an epic "superbubble" in markets is about to implode, just as stocks started tanking.

Yet Grantham has been issuing similar warnings for years, during which time markets have soared.

The founder of investment company GMO said in November 2010 that he thought the Fed was creating a bubble and that stocks could "crack" in 2011 or 2012. Since then, S&P 500 has risen more than 260%.

He said in January 2018 that "we are currently showing signs of entering the blow-off." The S&P 500 has since rallied 60%.

Grantham repeated his bubble warnings in June 2020 and in January 2021. Last week, he said the S&P 500 is likely to plunge almost 50%.


Most strategists think he's wrong about that and are still predicting gains for global and US stocks in 2022, mainly because they believe economic growth and so corporate earnings should remain strong.

"We think they will rise," Emmanuel Cau, head of European equity strategy at Barclays, told Insider. "Less than last year and with more volatility. But we still believe that we have sufficient growth in the system for earnings to grow."

Many Wall Street strategists say the sell-off is a good time to "buy the dip" and are predicting a steady rebound in stocks.

Chris Harvey, senior equity strategist at Wells Fargo, said Tuesday that he thinks the S&P 500 will rally to 4,715 by the end of the year, 8% higher than Tuesday's closing price of 4,356.45.

Read more: Goldman Sachs says buy these 24 stocks with solid balance sheets, healthy margins, and reasonable valuations as the market selloff intensifies


One underappreciated factor that should support the global economy is stimulus coming from China, Cau said, where the central bank has cut key interest rates as it tries to boost growth.

The Barclays strategist said investors' current fears about the economy could soon fade as the Omicron coronavirus variant dies down. And Cau said that at some point inflation numbers are going to start coming down from 39-year highs, reassuring many investors.

Of course, Grantham may be right this time. The S&P 500 is already down more than 7% for the year, as of Wednesday morning.

The tech-heavy Nasdaq 100 index is down more than 11%, with investors dumping speculative technology stocks as they prepare for the Federal Reserve to bring the easy-money era to a close.

But Cau said it's important to differentiate between parts of the market when thinking about the outlook for stocks.


He said unprofitable tech stocks are indeed still at risk. But the big-tech names are likely to still be able to post strong earnings, despite interest rates rising and inflation staying hot. Stock buybacks should also support prices, he said.

"We do believe earnings might help some of the stocks that are quite big in terms of the market to find a floor, and to provide a bit more stability to the index," Cau said.

John Stoltzfus, chief market strategist at Oppenheimer, told Insider he doesn't think the Fed hiking interest rates will damage growth. Rather, it's good for the economy because it'll get inflation in check.

On top of that, stocks remain the most attractive bet in financial markets, because interest rates remain below inflation. "The competition from fixed income right now and bank deposits certainly is not good," he said.