Avoid US stocks, AI bubble will burst, recession looming – Jeremy Grantham

February 3, 2024


Jeremy Grantham, the co-founder and long-term strategist of fund manager GMO, has warned investors to stay away from US stocks, as they are heavily overvalued and a recession is on the horizon. Grantham also believes that the AI bubble will burst, although he acknowledges its potential for revolutionizing industries in the coming decades.

Key elements:

  • Grantham recommends avoiding US stocks as they are significantly overpriced compared to the rest of the world.
  • He predicts that the stock market will have a tough year in 2024, with both earnings and multiples potentially falling.
  • Despite the AI frenzy in 2023, which interrupted a potential 20-30% slump in stocks, Grantham believes the bubble will burst and the euphoria surrounding AI will wane.
  • Grantham warns of a weaker US economy and a mild recession, despite solid GDP growth, low unemployment, and the possibility of interest rate cuts.
  • He highlights the threat of conflicts in Ukraine and the Middle East, which can have negative economic impacts, especially when asset prices are high.

In light of his grim forecasts, Grantham advises investors to be cautious and look for undervalued assets in emerging markets, depressed sectors, and growth areas.

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