Jeremy Grantham, co-founder of the Boston-based investment firm Grantham Mayo Van Otterloo (GMO), predicts a US recession “running perhaps deep into next year.” Grantham says we have entered a period of “moderately higher inflation.” Grantham speaks in an interview taped on August 17th for an upcoming episode of “Bloomberg Wealth with David Rubenstein.”
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Grantham Sees a US Recession Running Deep Into Next Year
Investor Jeremy Grantham has recently made waves by predicting a prolonged recession in the United States that will carry on deep into next year. His forecast comes at a time when the economy is grappling with the effects of the ongoing COVID-19 pandemic and the subsequent lockdown measures imposed by various governments.
Grantham, co-founder of GMO LLC, an investment management firm, has a reputation for accurately predicting major market shifts in the past. His notable forecasts include the Japanese asset bubble in the late 1980s and the global financial crisis in 2008. With such a track record, his warning of an extended period of economic decline warrants attention.
The COVID-19 pandemic has disrupted the normal functioning of various industries, leading to widespread job losses, business closures, and a decline in consumer spending. The initial hopes of a V-shaped recovery have fizzled out as the virus persists, necessitating continuous social distancing measures and impeding the reopening of economies.
While some experts were optimistic about a sharp rebound as soon as the virus was under control, Grantham takes a more cautious approach. He believes that the damage caused by the pandemic is far from over and that the recovery will take much longer than expected. Grantham points to the fact that recessions caused by financial bubbles tend to last longer and have slower recoveries. Considering the previous length and severity of the US stock market bubble, he claims this recession will follow suit.
One of the factors that Grantham highlights as a potential roadblock to recovery is the high level of corporate debt. Many businesses were heavily reliant on borrowing even before the crisis struck, and now the situation has worsened. Disrupted cash flows and declining revenues have raised concerns about the ability of companies to service their debt obligations. With the possibility of defaults and bankruptcies on the horizon, the impact on the overall economy could be significant and long-lasting.
Additionally, Grantham points to the high unemployment rate as another reason for a prolonged recession. Millions of Americans have lost their jobs, leading to decreased spending power, which can further suppress economic growth. The combination of high unemployment and reduced consumer confidence could ultimately result in a downward spiral of economic activity.
Grantham’s warning may sound bleak, but it serves as a reminder that the road to recovery will be challenging and filled with uncertainty. Governments and policymakers must adopt a cautious approach and be prepared for a prolonged period of economic decline. Swift and targeted fiscal stimulus measures will be crucial in supporting struggling businesses and workers who have lost their livelihoods.
While Grantham’s predictions should not be taken as a certainty, they do offer insights into the potential challenges ahead. It is essential for individuals and businesses alike to be prepared for the possibility of a prolonged recession and to plan and adapt accordingly.
As the world continues to battle the COVID-19 pandemic, the economic implications will be felt for years to come. Grantham’s forecast serves as a stark reminder that the road to recovery is long, winding, and fraught with obstacles.
It would have better for him to burn out than fade away. Ray Dalio is creeping down that same path.
What data does he have to support that interest rates are going to depress the real estate market? He doesn’t seem to cite any real time data here, just reciting basic macroeconomic tropes. If anything, high rates are keeping residential real estate prices elevated, because everyone is locked into their home. Commercial real estate is in trouble, but that has more to do with the shift to wfh, not interest rates. Generally, rates tend to depress asset prices, yes, but we are in a unique environment with considerably low inventory in the residential real estate market.
FJB bidens fault. Idiots who voted for him thanks a lot. Enjoy your recession liberal POS
Rather than attempting to predict future recessions and risking financial losses, a more effective strategy is to build a well-diversified portfolio that can withstand various market conditions. This approach has allowed some individuals to consistently generate substantial returns, averaging around 150K every quarter as reported by Bloomberg.
Although I agree with his last comment about life being simple, it is not as simple as it sounds. Get going to this simple path bleeds.
Its very simple…. as he says at the very end… when rates are low.. stocks will grow … and when rates are high, then stocks will die!
We have the choice to save real estate or save the rest
Would love to watch the entire episode, when will this be available please?
The fix is in the fed will pivot just in time before next election!!
Nice he did not go off on the climate change issue.
This man is in another level ♥️
Michael Burry is saying it too
hydrogen market is before explosion
I see the bulls in the comments, sure there might be price increases in some assets. But i doubt anything but a full pivot could stop the decline, and that would crush alot of countrys and currencys and destroy global demand.
Recession is coming, but ive got no idea when
Here we go again. the US already had a recession recently. This of course just speculation of what a minority of society or the US economy is being influenced to work more or earn wages harder or with more effort than before. Do you really believe in the quote on quote saying "creating jobs" is going to give us some hope? Probably not. But with effort came social stigma. And into effect the world negatively as before. The UK believe in the job market being the answer. But teenagers out of high-school don't want to work for meager salaries or wages. I wouldn't give them a shot. A next generation surprise of the cream of the crop, per say.
Liberal media will refuse to say, report or admit recession because they LOVE the Biden crime family !!
everytime this guy crawls out his cave marks the market bottom
We have been in a recession folks for some time. The Leading Economic Indicators have been down for a few years now. Yellow Trucking went bankrupt so did SVB & First Republic.
The GDP has been contracting as well for the most part. Inflation is not 3% as the government says. It is in double digits if you measure it by the same factors as in 70s.
It is just that the government keeps changing the methods when the numbers are not aligned with what they want. It is all a smokes screen but they are close to the end game anyway.
Every week when I go shopping prices are going up by 25%-75%. But the power of the government & mass media should not be underestimated.
One last issue. China has been growing 6.5% this year while USA is barely close to 2%. But according to the mass media China is close to great depression while USA is not even close to a recession.
You must do your own research & verification otherwise you have no hope of getting to the facts.
The new inflation rate is 3-4%. Get over it. The Fed can't do anything about it.
A broken clock is right twice a day!
Jeremy Grantham quote regarding the Fed predicting recessions 'yeah, I think the Fed's record on these things is wonderful! They are almost guaranteed to be wrong' Hahahahahahahaha How can he answer this with a straight face! Grantham credibility = ZERO!
This guy is the biggest bullshit artist on the planet. He originally said the stock market would crash 60% in 2023. The fact the press gives this guy that much attention is just silly. He’s irrelevant.
High interest rates only expedite the inevitable. A housing and stock market crash of at LEAST 50% are coming throughout the 2024-2026 recession not because of rates, but because the cost of living (mainly median home sold price) relative to median US income is 25% WORSE than the peak of the 2007 housing bubble. This is the single largest bubble of all time and half the world is 40% worse off than they were in just early 2020 due to incompetent, economically illiterate government fiscal policy. Sheer unaffordability causes a crash, just like in 2008. It was ARMs or subprime loans that caused a crash, it was ARMs and subprime loans that caused an emotional FOMO hype bubble of sheer unaffordability, specifically a 4.9X ratio of home price sold to median US income in 2007 at the peak, according to the government's FRED economic data numbers. Today that number is over 6.1X. Wildly, indescribably enormous bubble and the pain will be more similar to the great depression than the financial crisis of 2008. A $257,000 median home at the PEAK of 2007 before the crash sells for $436,000 today – 70% HIGHER. But the median income is only up 35% since then.
You guys can say what you want about him, 'bearish since born' etc etc, but the man is right in everything he said.
100% like it or not. We had a decade with low interest rates and now its time for the twist. Have fun 🙂