Jeremy Grantham: Recession Coming & Running Deep Into Next Year

Johnny HopkinsJeremy Grantham1 Comment

During his recent interview with Bloomberg, Jeremy Grantham is predicting the likelihood of a recession running deep into next year, accompanied by a drop in stock prices. Here’s an excerpt from the interview:

Grantham: The deflationary forces from the tech stocks breaking in 2021 probably too big. The power of interest rates rising and depressing the real estate market, very negative slow-moving influence.

I suspect that they will once again dominate and we will have a recession running perhaps deep into next year and an accompanying decline in stock prices.

Host: So the recession that you’re predicting is probably not going to happen in 2023 but…

Grantham: It may start in 2023.

Host: The Federal Reserve recently said that they think we’ve kind of cleared the recession hurdle and they don’t really project a recession any longer. Do you disagree with the FED on that?

Grantham: Yeah, I think the Fed’s record on these things is wonderful, it’s almost guaranteed to be wrong.

They have never called a recession and particularly not the ones following the great bubbles.

They prided themselves in stimulating the bubbles. They took credit for the beneficial effect of higher asset prices on the economy.

They have never claimed credit for the deflationary effect of asset prices breaking, and they always do.

Host: Now you said not too long ago that you weren’t a big fan of Jay Powell and the way he’s been handling inflation. Is that correct?

Grantham: Yes, that’s correct.

Host: And do you think he’s done a better job recently in getting inflation under control?

Grantham: I think it’s largely out of his hands.

The forces work.

I suspect inflation will never be as low as its average for the last 10 years. That we have re-entered a period of moderately higher inflation and therefore moderately higher interest rates.

In the end, life is simple. Low rates push up asset prices. Higher rates push asset prices down.

You can watch the entire discussion here:

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One Comment on “Jeremy Grantham: Recession Coming & Running Deep Into Next Year”

  1. Jeremy states: “In the end, life is simple. Low rates push up asset prices. Higher rates push asset prices down.” History has proven that the one word he forgot makes this statement nonsense. Higher rates push “some”, but not all prices down and lower rates push “some” prices up. In the early eighties rates started to decline but we still did well projecting price declines for overpriced stocks. Equally, there are specific stocks that will climb because of the underlying fundamentals as was the case in the seventies. I invest in stocks, not the market, and if the underlying business of which I am a part owner continues to grow at a rapid rate, particularly from an underpriced base, I am quite confident that the price will follow.

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