Renowned investor Jeremy Grantham recently warned that the US stock market rally amid the coronavirus crisis is a sign of a ‘real McCoy’ bubble that could eventually hurt many people.
RT’s Boom Bust discussed the stark warning with Transformity Research CEO Tobin Smith, who used to work with Grantham. The analyst says that the stock market legend, who has called three financial bubbles, is usually two or three years early in his predictions.
“A bubble is just simply when higher prices create higher prices. So we’re in a bubble in the sense that we’ve never had Fed money, we’ve never had $1,200 checks sent to people,” Smith said.
However, he believes that we are currently facing “an event-driven bear market,” which has multiple precedents throughout history.
“The market is not disrupted from reality… the market is doing exactly what the market has done for 200 years,” he continued. He added that the stock market is not today’s economy, but that it values up to 24 months in the future, and the rally simply shows that investors are betting on a sharp recovery.
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