Famed investor sees the stock market ‘tragedy’ when ‘superbubble’ bursts. The stock market could retest its June low over the next few weeks on recession fears

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via nypost:

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Despite a summer rally, the US stock market is still an unprecedented “superbubble” that will cause financial “tragedy” for investors when it bursts, according to famed investor Jeremy Grantham.

Grantham, the co-founder of asset management firm GMO in Boston, said the current superbubble is entering its “final act” due to deteriorating economic conditions. A recent “bear market rally” that saw the S&P 500 recoup 58% of its losses from a June low follows the pattern of past stock market crashes in 1929, 1973 and 2000, he added.

“The current superbubble features an unprecedentedly dangerous mix of cross-asset overvaluation (with bonds, housing, and stocks all critically overpriced and now rapidly losing momentum), commodity shock, and Fed hawkishness,” Grantham wrote in a letter to clients dated Wednesday.

via businessinsider:

The stock market could be on the verge of retesting its mid-June low over the next few weeks as investors grapple with fears of a recession and poor seasonals, according to a Thursday note from Ned Davis Research.

The investment research firm highlighted that the S&P 500 is about to enter its worst trading period of the year based on historical data. “The weakest time of the year for the S&P 500 has been from September 6 to October 25,” NDR said.

That, combined with an extra hawkish Federal Reserve following Jerome Powell’s hawkish speech at Jackson Hole last week, means “that the window for a retest has flung open,” NDR said.

Recession odds are on the rise as the Fed continues to raise interest rates in the face of a slowing economy, and there’s no sign they’ll stop raising rates anytime soon. The Fed is expected to raise the Fed Funds Rate by 75 basis points at its FOMC meeting later this month.

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