While markets across the globe “aren’t in a bubble yet” legendary investor Jeremy Grantham, told investors at a Morningstar conference on June 25th most stock markets in the world are overpriced — “and the bond market is more overpriced that at any time in history.” To break the march toward what he termed Bubbleland “we’ll have to wait until merger activity reaches “more of a frenzy” and individuals “become crazy buyers… But for now, individuals are buying a normal amount of shares, and no bubble has ever broken until individuals pour into the market.”
Grantham suggests the trigger needed to stop the markets’ steady rise won’t come from an interest-rate increase.By artificially depressing interest rates the Fed had made it “desperately appealing” for corporations to borrow cheaply to buy their own stock back, noting that capital expenditures are “dismal.”
Though “everyone is in a state of hysteria” over the thought of an interest-rate increase it won’t derail the markets’ climb or break the march toward what he termed bubbleland. “The market went up all the time without missing a beat when the Fed raised rates eight times from early 2004 to early 2006…Markets will likely plod higher until at least the Presidential election.”
WSJ note “Mr. Grantham’s calls are widely watched in part because the firm’s money managers don’t have a reputation for being perma-bulls or perma-bears. He was early in predicting the financial crisis and then reversed course before markets started rebounding in 2009.”
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