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Market legend Jeremy Grantham has a history of calling out bubbles.
As the co-founder of asset management firm GMO, he famously warned about the 2000 dot-com bust and the 2008 financial crisis. Now, he believes another major market reckoning is in the works.
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In a recent appearance on The Diary of a CEO podcast, Grantham didn’t mince words.
“This is, I think, the biggest investment bubble in American history,” he said (1).
Momentum in the U.S. stock market remains a powerful force. The benchmark S&P 500 has gained more than 70% over the past five years, while investor excitement over artificial intelligence has sent many tech stocks soaring.
But Grantham sees danger in chasing the hottest names.
“The high flyers will probably come down a lot. The stocks that have gone up the most — AI and the more exciting stocks with the biggest moves. Historically, would be expected to come down the most,” he said.
His suggestion is blunt: sell.
“If you have a big position in U.S. technology stocks, my personal advice would be to sell it all,” he said.
And his warning extends beyond the tech sector.
“Don’t own U.S. stocks,” he said.
That stark message stems from how far Grantham believes the U.S. stock market could fall from current levels.
During a recent CNBC interview (2), Grantham called this “the most expensive market in American history.” When asked what period looked most comparable to today’s market, he said the tech bubble of 2000 would “come the closest.”
Then came the number that would make any stock-heavy investor nervous.
“The market’s going to peak out and drop back to trend. And getting back to trend from here is closer to a 70% decline than a 50%,” he warned.
The host pressed him on the scale of that call: “A 70% decline you think is in order?”
“Yes I do,” Gratham replied without hesitation.
That is a dire forecast — and one that could carry serious consequences for the nest eggs of millions of Americans.
Many workers are heavily exposed to equities through 401(k)s, IRAs and other retirement accounts. A 70% market crash would be devastating. During the market sell-off in 2022 — which pales in comparison to the kind of decline Grantham is describing — CBS News reported (3) that 401(k) and IRA plan participants experienced an estimated loss of around $3 trillion.
