Though he expects the economy will look better for a couple of quarters, GMO head Jeremy Grantham says that the long-term imbalance between overproducers like China and overspenders like the Unites States will be a multiyear drag on growth.
"We're not rich, and we're undersaved and underpensioned," Grantham told Smart Money.
"Those will be a real brake on economic growth."
Still, Grantham says, investors who move swiftly in this market can make money.
“The people who invest in energy alternatives will make more,” he says.
“Alternative energies and combating climate change are the single most important economic initiatives over the next 10 years — really over the next 50 years.”
Grantham thinks a fair price for the S&P 500 index is 900.
“By sheer divine intervention we bought into the market on March 6, the day it hit the recent low of 666,” he notes.
“It’s likely, but far from certain, that we’ll go back and make a new low. You aren’t going to get to buy at the absolute low unless you have a time machine.”
When Grantham bought in early March, he bought only stocks he thought would have a 10 to 14 percent average annual return after inflation.
“It was somewhat disappointing that prices moved up so fast in just a couple of weeks,” he says. “The odds are a bit more than 50-50 that we will go back and test that low.”
The Economic Cycle Research Institute reported its measure of U.S. future economic growth inched higher in the latest week, while its yearly growth rate continued to climb toward positive territory, according to Reuters.
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