'Super Bubble' Looming In US Markets, Cautions This Legendary Investor - Grayscale Bitcoin Mini Trust (BTC) Common units of fractional undivided beneficial interest (ARCA:BTC)

Long-term investment strategist and co-founder of GMO Investment and Asset Management, Jeremy Grantham, issued a warning about a potential “super bubble” in the U.S. stock market.

What Happened: During an episode of Bloomberg’s Merryn Talks Money on Friday, Jeremy Grantham cautioned about the existence of a “super bubble” in the U.S. stock market. While he does not believe the current bubble is as severe as Japan’s 1989 bubble or the real estate bubble of the same period, he still sees it as a significant risk.

Grantham noted that all traditional stock valuation metrics, including the cyclically adjusted price-to-earnings ratio, have reached record highs. He also voiced concerns about the bubble surrounding AI, a major market driver. “If the government does not smooth out the benefits of AI, you will have either starvation or revolution,” Grantham warned.

Grantham proposed investing in sectors aimed at “greening the economy,” noting that it’s a currently undervalued market sector with a potential for significant regrouping and outperformance. He also cautioned against leverage, highlighting the importance of businesses maintaining minimal or no debt to withstand unexpected shocks.

Speaking about non-U.S. markets, Grantham stated that they are “much less dangerous to own and will very likely over five or 10 years crush the U.S. market as has happened several times.”

Granthan cautioned against cryptocurrencies calling them “a wonderful speculative medium." He also spoke about being uncomfortable with gold as it doesn’t provide dividends. However, he prefers them over Bitcoin BTC/USD.

Why It Matters: Grantham with more than five decades of investing experience is known for his accurate predictions of past financial crises.

His warning comes at a time when the U.S. stock market is going through a complex phase. The NASDAQ Composite QQQ has lost 3.82% on a year-to-date basis, while the S&P 500 SPY slid 0.12% during the same period. Over the past month, the S&P 500 dropped nearly 3%.

His concerns about a potential bubble, particularly surrounding AI, highlight the risks associated with overvaluation. His advice to invest in sectors aimed at “greening the economy” and to avoid leverage underscores the need for strategic and sustainable investment practices.

Meanwhile, the views of Michael Hartnett, a Bank of America strategist, also resonated with Grantham. Hartnett stated that the so-called ‘bro bubble' that fuelled a rally in cryptocurrencies and technology stocks is bursting.