GMO’s Jeremy Grantham warns ‘super bubble’ is bursting as Wall St, ASX fall again

A prominent investor says US share markets, along with most other assets, are in a “super bubble” that in the process of bursting into a crash.

It has been a rocky start to the year for the US share market, and Jeremy Grantham said the collapse in stocks he predicted a year ago is underway and major US indexes could fall by half.

The British born co-founder of Boston-based investment firm GMO said US stocks are in a “super bubble”, the fourth of the past century.

“This checklist for a super bubble running through its phases is now complete and the wild rumpus can begin at anytime,” Mr Grantham wrote in a note to investors.

“When pessimism returns to markets, we face the largest potential markdown of perceived wealth in US history.”

He said the US was seeing simultaneous bubbles for the first time across all major asset classes of real estate, stocks, commodities and bond markets.

“We have the most exuberant, ecstatic, even crazy investor behaviour in the history of the US stock market.”

Mr Grantham sees the S&P 500 index dropping by half, to a level of around 2,500, and warned there could a even bigger fall on the Nasdaq.

The Nasdaq has already entered correction territory, and is now down 12 per cent from its November record high.

He noted that many people would not want to hear his “old fogey” advice, just as he ignored bubble warnings from more experienced investors early in his career.

“I doubt speculators in the current bubble will listen to me now, but giving this advice is my job and possibly the right thing to do,” he said.

“So once more unto the breach, dear friends.”

Mr Grantham said many speculative stocks started falling nearly a year ago, including the Ark Innovation exchange traded fund in the US, which has already lost 52 per cent of its value.