SUMMARY
- US house prices may face a prolonged downturn
- S&P 500 could plunge between 27% and 52% from current levels
- Banking problems could bring further financial stress and impact bond yields
Listen up, folks! Jeremy Grantham's got some news that might give you chills. He's predicting some serious drops in US house prices, a possible 52% tumble in the S&P 500, and more banking issues on the horizon.
Here's the deal: American homes have gotten crazy expensive compared to household incomes, and skyrocketing mortgage costs are totally killing people's ability to buy homes. Grantham, our market historian and GMO cofounder, shared his thoughts with CityWire recently.
He says that when folks realize their properties are worth way less than they thought, they'll probably feel a bit bummed and cut back on fancy stuff like foreign trips and grad school. This decline in spending could slow down economic growth. Grantham doesn't expect a sudden crash, but he does think house prices will gradually become more affordable.
Grantham's been warning us about a "superbubble" in stocks, bonds, and real estate since January 2022, and he's not stoked about how near-zero interest rates fueled this mess. But with the Fed hiking rates to combat inflation, the costs of mortgages, car loans, and other debts are going up.
And Grantham's got more: he's predicting a sharp decline in stocks, with the S&P 500 potentially plunging between 27% and 52%. Plus, recent banking collapses have some people stressing about a credit crunch. Grantham's advice for fixed-income investors? Be cautious, because more banking drama could mess with those attractive bond yields.
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