Tags: jeremy grantham | crazy | pandemic | rally | market | bubble

Jeremy Grantham: 'Truly Crazy' Pandemic Rally Fuels Market Bubble

Jeremy Grantham: 'Truly Crazy' Pandemic Rally Fuels Market Bubble
(Svitlana Zakharevich/Dreamstime)

By    |   Friday, 13 November 2020 01:35 PM

Investor Jeremy Grantham doubled down on his belief that the U.S. stock market is in a bubble.

Many aspects of its recovery from pandemic lows have been “truly crazy,” the founder of asset management firm GMO recently told CNBC.

“The more spectacular the rise and the longer it goes, the more certainty one can have that you’re in the ‘Real McCoy’ bubble,” Grantham said.

“The market just ground up, and the speed was unimpressive, a kind of steady drumbeat,” said Grantham. “This is quite different. This has been powerful, rapid and, in many areas, truly crazy,” he said.

“You want to see lots of crazy behavior, which we really have seen a lot of” since June 17, Grantham added, which was when he first told CNBC that he was witnessing the fourth major bubble of his career.

“And you want to see not just the market rise, but if anything, an acceleration. And the rate of market rise, since the turn in March/April, has been nothing sort of sensational.”

Markets have continued to remain volatile amid politcal and pandemic uncertainty, and most likely will continue to churn in the near future.

For example, Wall Street gained on Friday as Disney and Cisco's upbeat results brought the focus back to corporate earnings at the end of a volatile trading week that saw record surges in coronavirus cases and increased hopes of a working vaccine.

The three major U.S. stock indexes fell on Thursday as U.S. coronavirus cases jumped and investors weighed how fast an effective vaccine would be rolled out.

More than a dozen U.S. states reported a doubling of new COVID-19 cases in the last two weeks, with Chicago's mayor issuing a month-long stay-at-home advisory on Thursday.

Positive early data from a large vaccine study earlier this week prompted a rotation into sectors that usually benefit from an upswing in the economy, such as financial and energy stocks, Reuters explained.

Market expectations of volatility are higher in late December to early January, around when Georgia's Jan. 5 run-off election for its two U.S. Senate seats, which will decide whether Democrats can gain majority control of that chamber, Reuters said.

Moody's Investors Service, in a note this, warned that ongoing legal challenges to Joe Biden's projected victory could unsettle markets and stir social tensions, which could have a material impact on the U.S. recovery.

Still, Moody's said its assumption was that "U.S. institutions will eventually resolve these issues without causing any meaningful, enduring credit impact."

Brad McMillan, chief investment officer at Commonwealth Financial Network, said investors are less worried about President Donald Trump's challenge to election results than about the chance that Georgia voters will hand control of the Senate to Biden's Democrats on Jan. 5.

"The story of the start of November was everyone feeling good that the world wasn't ending," McMillan said. "The story for the rest of the month is likely to be how investors start worrying again."

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Investor Jeremy Grantham doubled down on his belief that the U.S. stock market is in a bubble. He recently told CNBC that many aspects of its recovery from pandemic lows have been "truly crazy."
jeremy grantham, crazy, pandemic, rally, market, bubble
Friday, 13 November 2020 01:35 PM
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