Does GMO’s Jeremy Grantham See a Bubble Coming?

GMO’s Jeremy Grantham says stocks and bonds will “fail to generate inflation-beating returns over the next seven years, but he doesn’t see an imminent crash in share prices,” according to a recent article in The Wall Street Journal. The article says that Grantham, who predicted bubbles in 2000 and 2007, argues that while current stock valuations are high, they are supported by healthy profit margins. Further, he believes that the Fed’s low interest rate policy “supports share prices by making fixed-income investments less attractive as an alternative to stocks.” In an interview with WSJ, Grantham offered the following insights: Valuations […]

Cliff Asness Says Stocks and Bonds Will Return only 2%

At the 2nd annual Evidence-Based Investing Conference earlier this month, AQR’s Cliff Asness shared his view that the expensive financial markets will offer weaker returns going forward. This according to a recent CNBC article. According to the article, Asness predicts that investors with a “balanced portfolio of stocks and bonds will only generate 2 percent real annual returns,” but warned against betting against the market. He argues that strong evidence exists indicating that high CAPE (cyclically adjusted price-earnings) ratios will translate into lower returns for the next ten years. “Don’t market time with this,” Asness said, adding, “Valuation of markets […]

Are We Partying Like its 1999?

By Jack M. Forehand (@practicalquant) —  One of the most common comparisons I hear for the current state of the stock market is the bubble of the late 90s. With the market seemingly setting new highs every day, valuations stretched, and technology stocks leading the way, there appear to be many similarities on the surface. When you look deeper, however, there are also some clear differences. Given that the 90s rally ended on a bad note and that many predict the same ending to the current bull market, I wanted to take a look at the similarities and differences between […]

Hulbert: Small Cap Sector Shockingly Overvalued

In a recent MarketWatch article, Mark Hulbert reveals a revised calculation that the small-cap sector is currently valued at a whopping 78.7 times earnings. He writes, “the Russell 2000’s true P/E today is higher than it was at either the top of the internet bubble or the 2007 bull market peak.” Hulbert describes the calculation, which he credits to financial services firm INTL FCStone’s Vincent Deluard, who told him that nearly a third of the companies in the Russell 2000 index are losing money. This omission, writes Hulbert, “has huge consequences.” Neither the FTSE Russell (the company that created the […]

David Tepper Says the Market is Not Overheated

The head of Appaloosa Management is “rejecting arguments that stocks are overvalued and believes there are still plenty of opportunities,” according to a recent CNBC article. Tepper says “any comparisons to past overheated markets are ridiculous,” adding that while stocks do look expensive, higher multiples are supported by the global economy in which he believes growth will continue and earnings will improve. Tepper argues further that stocks are still inexpensive relative to interest rates, and any rate hikes from the Fed will be slow in coming. The article cites Tepper’s 2010 prediction that “either the market would rally on strong […]