GMO argues U.S. markets are in a late-stage “superbubble,” where extreme valuations across multiple asset classes could unwind simultaneously. The paper suggests today’s setup mirrors past peaks like 1929 and 2000, with speculative behavior and narrow leadership signaling elevated downside risk ahead.
Let The Wild Rumpus Begin – (Approaching the End of) The First U.S. Bubble Extravaganza: Housing, Equities, Bonds, and Commodities
GMO
Jeremy Grantham
Research
12 Pages
Key Takeaways
Superbubble Historical Pattern: 4 U.S. superbubbles in 100 years all reverted to trend, with 100% eventually correcting back to baseline valuations despite short-term excess gains.
Extreme Price Acceleration: The NASDAQ surged 58% from 2019 to early 2021 and 105% from Covid lows, reflecting late-cycle acceleration typical of prior bubble peaks.
Multi Asset Bubble Risk: 3.5 asset classes are simultaneously inflated today, a first historically, raising the probability of a combined drawdown exceeding prior single-asset corrections.
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