Market legend Jeremy Grantham warns of a 70% stock market catastrophe. Time to ‘sell it all’?
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Market legend Jeremy Grantham warns of a 70% stock market catastrophe. Time to ‘sell it all’?
016 mins
The Diary of a CEO/ YouTube
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Market legend Jeremy Grantham has a history of calling out bubbles.
As the co-founder of asset management firm GMO, he famously warned about the 2000 dot-com bust and the 2008 financial crisis. Now, he believes another major market reckoning is in the works.
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In a recent appearance on The Diary of a CEO podcast, Grantham didn’t mince words.
“This is, I think, the biggest investment bubble in American history,” he said (1).
Momentum in the U.S. stock market remains a powerful force. The benchmark S&P 500 has gained more than 70% over the past five years, while investor excitement over artificial intelligence has sent many tech stocks soaring.
But Grantham sees danger in chasing the hottest names.
“The high flyers will probably come down a lot. The stocks that have gone up the most — AI and the more exciting stocks with the biggest moves. Historically, would be expected to come down the most,” he said.
His suggestion is blunt: sell.
“If you have a big position in U.S. technology stocks, my personal advice would be to sell it all,” he said.
And his warning extends beyond the tech sector.
“Don’t own U.S. stocks,” he said.
That stark message stems from how far Grantham believes the U.S. stock market could fall from current levels.
During a recent CNBC interview (2), Grantham called this “the most expensive market in American history.” When asked what period looked most comparable to today’s market, he said the tech bubble of 2000 would “come the closest.”
Then came the number that would make any stock-heavy investor nervous.
“The market’s going to peak out and drop back to trend. And getting back to trend from here is closer to a 70% decline than a 50%,” he warned.
The host pressed him on the scale of that call: “A 70% decline you think is in order?”
“Yes I do,” Gratham replied without hesitation.
That is a dire forecast — and one that could carry serious consequences for the nest eggs of millions of Americans.
Many workers are heavily exposed to equities through 401(k)s, IRAs and other retirement accounts. A 70% market crash would be devastating. During the market sell-off in 2022 — which pales in comparison to the kind of decline Grantham is describing — CBS News reported (3) that 401(k) and IRA plan participants experienced an estimated loss of around $3 trillion.
Grantham is not the only market veteran getting nervous. Ray Dalio, founder of the world’s largest hedge fund, Bridgewater Associates, recently warned (4) that the U.S. stock market is approaching bubble territory last seen in 2000 and 1929.
To be sure, markets are inherently volatile, and bubbles can take longer to break than skeptics expect. But whether or not you buy into Grantham’s 70% crash warning, his message is hard to ignore: when valuations are this stretched, putting all your eggs in one basket can be dangerous.
Here are three simple ways to diversify beyond traditional stocks.
Own what Wall Street can’t print
When storm clouds gather over the markets, gold often steps back into the spotlight — and for good reason.
Long seen as the ultimate safe haven, gold isn’t tied to any single country, currency or economy. It can’t be created at will by central banks like fiat money, and in times of economic turmoil, market turbulence or geopolitical uncertainty, investors tend to pile in — driving up its value.
In fact, Dalio has repeatedly emphasized gold’s role in a resilient portfolio.
“People don’t have, typically, an adequate amount of gold in their portfolio,” he told CNBC last year. “When bad times come, gold is a very effective diversifier.”
The market has already taken notice. Over the past five years, as inflation continued to erode the value of paper currency and investors looked for protection outside traditional stocks, gold has climbed 130%.
Other prominent voices see further potential. JPMorgan CEO Jamie Dimon has said that in this environment, gold can “easily” rise to $10,000 an ounce.
One way to invest in gold that can also provide significant tax advantages is to open a gold IRA with the help of Goldco.
Gold IRAs allow investors to hold physical gold or gold-related assets within a retirement account, thereby combining the tax advantages of an IRA with the protective benefits of investing in gold, making it a compelling potential option for those wanting to ensure their retirement funds are diversified during rough economic times.
Like stocks, real estate has its cycles, but it doesn’t rely on a booming market to generate returns.
Even during a recession, high-quality, essential real estate can continue to produce passive income through rent. In other words, you don’t have to wait for prices to rebound to see a payoff — the asset itself can work for you.
It’s also a time-tested hedge against inflation. As the cost of materials, labor, and land rises, property values often increase as well. At the same time, rental income tends to climb, giving landlords a revenue stream that adjusts with inflation.
Owning rental property allows investors to collect monthly rent payments, but being a landlord is rarely as passive as it sounds. Managing a property involves finding and screening tenants, collecting rent, and handling maintenance and repair requests (out of your own pocket) — and that’s assuming you can save enough for a down payment and get a mortgage to buy the property in the first place.
The good news? These days, you don’t need to buy a property outright to invest in real estate. Crowdfunding platforms like mogul offer an easier way to get exposure to this income-generating asset class.
As a real estate investment platform offering fractional ownership in blue-chip rental properties, mogul gives investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.
Each property undergoes a rigorous vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property.
Another option is Lightstone DIRECT, which gives accredited investors access to single-asset multifamily and industrial deals.
Lightstone DIRECT’s direct-to-investor model ensures a high degree of alignment between individual investors and a vertically-integrated, institutional owner-operator — a sophisticated and streamlined option for individual investors looking to diversify into private-market real estate.
Prominent investors like Dalio often stress the importance of diversification — and for good reason. Many traditional assets tend to move in tandem, especially during periods of market stress.
That message feels especially relevant today. Nearly 40% of the S&P 500’s weight is concentrated in its ten largest stocks, and the index’s CAPE ratio hasn’t been this high since the dot-com boom.
This is where, for many investors, alternative assets come into play. These can include everything from real estate and precious metals to private equity and collectibles.
But there’s one store of value that routinely flies under the radar: It’s scarce by design, coveted worldwide and frequently locked away by institutions.
We’re talking about post-war and contemporary art — a category that has outpaced the S&P 500 with low correlation since 1995.
It’s easy to see why art pieces often fetch new highs at auctions: The supply of the best works of art is limited, and many of the most desirable pieces have already been snatched up by museums and collectors. That scarcity can also make art an attractive option for investors looking to diversify and preserve wealth during periods of high inflation.
Until recently, purchasing art has been a domain reserved for the ultra-wealthy — like in 2022 when a collection of art owned by the late Microsoft co-founder Paul Allen sold for $1.5 billion at Christie’s New York (5), making it the most valuable collection in auction history.
Now, Masterworks — a platform for investing in shares of blue-chip artwork by renowned artists, including Pablo Picasso, Jean-Michel Basquiat and Banksy — can help you get started with this asset class. It’s easy to use and, with 27 successful exits to date, Masterworks has distributed more than $65 million in total proceeds (including principal).
