Legendary investor Jeremy Grantham warns the current market backdrop is among the worst he’s ever seen – and says holding cash is a good idea

• Jeremy Grantham rang the alarm on the current market backdrop and mentioned shares are nonetheless overvalued.
• He mentioned holding cash was a good idea, and confirmed he’s betting towards the Nasdaq and junk bonds.
• Grantham was among 6 monetary consultants sharing their market outlooks with the Wall Street Journal.

Jeremy Grantham has warned traders to arrange for extra ache, saying the stage is set for asset costs to maintain tumbling.

“This is about as bad a package as we have ever seen,” he mentioned about the market’s current fundamentals in a current Wall Street Journal interview for an article through which six monetary consultants predicted the place the markets had been heading.

Grantham, who cofounded GMO and is a market historian, famous that inventory valuations are nonetheless far above historic averages, regardless of slowing financial development, rampant inflation, and the Federal Reserve’s flurry of curiosity-fee raises this yr.

The Journal reported Grantham had touted holding cash as one among the greatest choices accessible to on a regular basis traders, given the danger that different belongings may plummet in worth and not get well for years or a long time.

The veteran investor additionally confirmed he’s betting against the Nasdaq index and excessive-yield or “junk” bonds, suggesting he expects tech shares to proceed dropping, and company defaults to spike.

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Grantham has been predicting a devastating market downturn for a whereas. In a analysis be aware final August, he warned an epic “superbubble” throughout shares, bonds, and housing was on the verge of bursting.

Alongside Grantham, the Journal interviewed 5 different commentators on their market outlooks.

This is what the others mentioned:

• Lloyd Blankfein, the former Goldman Sachs CEO, argued the market is being too pessimistic. He raised the prospect of Russia altering its strategy to its conflict in Ukraine, Saudi Arabia releasing extra oil, and the Fed pausing its fee hikes quickly. He additionally really useful traders capitalize on the market downturn this yr by shopping for excessive-high quality shares they beforehand thought-about too costly.
• Rick Rieder, BlackRock’s CIO of world fastened earnings, predicted bonds would rally subsequent yr as he believes the inflation menace is fading, and due to this fact the Fed will not should hike charges as a lot as the market expects. Higher charges usually push down bond costs and increase yields.
• Rob Arnott, the founding father of Research Affiliates, mentioned shares nonetheless look costly in comparison with their valuations throughout previous crises, so he does not consider markets have bottomed out but.
• Nancy Davis, the founding father of Quadratic Capital Management, warned traders are being too blasé about inflation, and underestimating the danger that it stays elevated. 
• Paul Britton, the founding father of Capstone Investment Advisors, steered markets will stay unstable, and suggested traders to diversify their portfolios past shares and bonds

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