The author argues that strong economic conditions, cheap credit, and widespread optimism have inflated a synchronized global asset bubble. While its timing remains uncertain, a reversal could widen risk premiums, weaken economic activity, and produce steep losses across markets despite intervention from global central banks.
It’s Everywhere, in Everything: The First Truly Global Bubble
GMO
Jeremy Grantham
Article
1 Pages
Key Takeaways
Global Valuations Stretched: All 3 major asset classes, real estate, stocks, and bonds, appeared expensive relative to history.
Risk Reward Inverted: The expected return gap between low and high risk portfolios fell from 6.4 percentage points in 2002 to a negative slope by 2006.
Past Bubbles Collapsed: Following the 2000 break, the NASDAQ and internet stocks declined nearly 80% and 90%, respectively.
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