Waiting for the Last Dance
Report

Waiting for the Last Dance

The Hazards of Asset Allocation in a Late-stage Major Bubble

GMO, 2021

Editorial Rating

9

Recommendation

In 2008, a speculative bubble in housing, mortgages and derivatives imploded with disastrous consequences. Eight years earlier, investor-fueled dot-com mania sputtered out. Now veteran market professional Jeremy Grantham, the co-founder of investment firm GMO, sees new market froth forming. Citing inflated valuations, massive price expansion and a disconnect from fundamentals, he advises that timing a market exit may not be as critical as recognizing that the fall will occur. Investors will find intelligent insights from the vantage point of experience in this illuminating report.

Summary

Long bull markets eventually correct – but severely.

Asset bubbles and their eventual implosions are part of the historical financial tapestry. Some notorious examples include the 1720 South Sea Bubble, the dot-com bust in 2000 and the housing collapse of 2008.

The current period in equities represents yet another bull market that has stretched itself thin in terms of price and value.

Several factors reveal when markets are overextended.

Observers identifying the point at which a bull market is well over its skis can first look to the speculative nature of investor sentiment. As...

About the Author

Jeremy Grantham is the cofounder of GMO, LLC and the firm’s chief investment strategist.


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