GMO's Grantham: S&P 500 Could Drop Another 25% in the Next Year

What You Need to Know

Fair value for the S&P 500 could be about 3,000 a year from now, and there’s nothing stopping it from slipping below that, he tells the AP.
The bursting of the “superbubble” is hardest for mid-career people, Grantham said.
Young investors with long time horizons should benefit from stock pullbacks, he notes.

Despite this year’s major stock market slide, investor Jeremy Grantham sees room for further pullback.

Grantham, co-founder and chief investment strategist of Grantham, Mayo, van Otterloo & Co., told The Associated Press recently that fair value for the S&P 500 a year from now would be “pretty close to 3,000” — a roughly 24% decline from its value in Friday afternoon trading.

And there’s nothing to stop the market from slipping below fair value, he said in the interview published Monday. The S&P 500 is “certainly entitled to spend several months below 3,000,” Grantham told the AP.

The S&P 500 is down nearly 17% year to date, recently reaching 3,959. In mid-June it hit a 52-week low of 3,636.87.