New Fed Forecasts imply a sharp slowdown through remainder of the year…. Grantham: ‘Brace for the S&P 500 to plunge 50%’

Nearly all Fed officials saw risks to that already-downgraded forecast as tilted to the downside.

via Bloomberg:

Federal Reserve Chair Jerome Powell and his colleagues are expecting a sharp dropoff in economic activity through the rest of 2023 — at least, that’s the implication from new economic projections they published this week.

The figures show policymakers now expect the US to eke out a 0.4% expansion this year, down from the 0.5% growth rate they penciled in at the last forecast round in December.

Brace for the S&P 500 to plunge 50% and a painful recession to strike as the ‘everything bubble’ bursts, elite investor Jeremy Grantham warn

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  • Jeremy Grantham expects stocks to plunge and a recession to hit as the “everything bubble” bursts.

  • The investor warns the S&P 500 could halve in value to around 2,000 points in a worst-case scenario.

  • Grantham advised against betting on US stocks for the short term, and touted emerging markets.

Jeremy Grantham has warned the implosion of an “everything bubble” could tank the S&P 500 by up to 50%, and plunge the US economy into a painful recession.

The prices of stocks, bonds, real estate, fine art, and other investments ballooned to unsustainable highs during the pandemic, Grantham said. The market historian and GMO cofounder shared his thesis with economist David Rosenberg during a recent Rosenberg Research webcast.

The current bubble is “pretty damn big” compared to previous ones, and dwarfs the dot-com boom in scope, Grantham said.

“It’s bad enough just doing the equity market in 2000,” he said. “This time, we have done a dead ringer for the equity market, plus the gravy, we’ve done the housing market and the bond market.”

“Be advised this is not a genteel setback like 2000,” Grantham continued, predicting a bear market could persist until deep into next year. He noted the dot-com crash only caused a mild recession, but even so, the Nasdaq index plummeted 82% and the S&P 500 halved in value during that period.

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