Jeremy Grantham Predicts Extended Global Economic Weakness
MarketWatch’s Jonathan Burton wrote about well-known money manager Jeremy Grantham back on August 29. Burton had this to say about the chairman of GMO LLC:
Jeremy Grantham is not given to false alarms. The chief investment strategist at GMO, the highly regarded Boston-based manager of institutional and high-net-worth accounts, makes buy and sell decisions with a combination of computerized technical analysis and old-fashioned spadework. But nowadays, his digging for attractively valued stocks is mostly hitting rocks, and that has Grantham deeply concerned.
“The fundamentals have turned out to be worse than I had thought,” Grantham said. “My advice would be, don’t take any risk.”
Burton explained what the famous investor was getting at:
What he means is that in this market, don’t be a hero; live to fight another day. Here’s why: Global economic growth is slowing under the weight of increasingly illiquid credit markets and inflationary pressures. Weaker growth slashes corporate earnings, and since stock prices are tied to earnings, the outlook for equities worldwide, as Grantham sees it, is poor to middling…
One of his biggest fears, he added in an interview, is that “the whole global economy will be weaker than the market expects for quite a considerable time.” How long? “I would guess at least two years of sustained disappointment.”
Did Grantham see any bright spots on the investment landscape? The MarketWatch reporter wrote:
Don’t hide under the mattress just yet. Grantham points out that many of the world’s strongest companies are based in the U.S., which could help the U.S. market’s relative performance. Moreover, he said, the weaker global picture will benefit the U.S. dollar, so the American market could turn out to be “a safe haven.”
Source:
“The four horsemen of the market”
Jonathan Burton
MarketWatch, August 29, 2008
