Jeremy Grantham Warns of Tech Bubble and US Recession
Introduction
Jeremy Grantham, co-founder of GMO and a well-known investor, has raised concerns about the current tech bubble and the possibility of a US recession. In a recent investor event, Grantham highlighted the impact of artificial intelligence (AI) hype on stock prices and the overall economy.
The Tech Bubble
- Grantham believes that the hype around AI has prevented the tech bubble from collapsing.
- He points out that a few American stocks have experienced significant growth due to AI, creating the impression that everything is going well.
- However, Grantham warns that prices are extremely high and the economy is starting to unravel.
US Stocks, Real Estate, and Commodities
- Grantham is wary of investing in US stocks, real estate, and commodities.
- He suggests that overseas stocks are less overvalued compared to American stocks.
- If investing in US equities, Grantham advises prioritizing high-quality companies with less debt and better resilience to economic downturns.
- He also cautions against investing in real estate, as declining mortgage rates have driven prices to high multiples in many developed countries.
- Commodities are considered unpredictable and volatile investments, suitable only for investors with strong nerves.
Climate Change Stocks
Grantham sees companies involved in fighting climate change as compelling investments.
He believes that these stocks will experience significant revenue growth, similar to Tesla and electric vehicles, compared to traditional car manufacturers.
Probability of a US Recession
Grantham predicts a 70% chance of a US recession in the next 18 months.
While inflation has slowed down in recent months, Grantham believes that the Federal Reserve and the financial establishment underestimate the probability of a recession.
Goldman Sachs and the Fed’s staff economists have lower expectations of a recession, but Grantham remains skeptical.
Conclusion
Jeremy Grantham’s warnings about the tech bubble, US stocks, and the possibility of a recession serve as a reminder to investors to exercise caution and consider the potential risks in the market.
