Jeremy Grantham, who called the market tops before the dot-com and housing bubbles burst, wants investors to know he hasn't abandoned his bearish ways even though he appears more optimistic these days.
In a market note out Thursday in reply to "a few misquotes and misunderstandings by journalists" about earlier commentaries, GMO's chief investment strategist writes that high stock market prices are not permanent and price-to-earnings multiples and profit margins will eventually regress.
But the pace of that regression, which historically took seven years throughout most of the last century, will now take about 20 years, and the regression will be only about two-thirds back from the "old normal," writes Grantham.
As a result, he expects 2.7% gains for the S&P 500, adjusted for inflation, for the next 20 years, "a rate bound to break the hearts of many corporate and public pension fund officers." Other investors and financial advisors also won't be happy with such lackluster returns.
