Jeremy Grantham is the co-founder and chief executive of GMO

GMO’s co-founder warned that the U.S. may soon be the last of a superbubble that saw general prosperity across the markets despite increasing inflation and the pandemic. 

A paper by Jeremy Grantham, a legendary U.K. investor, claimed that stocks and bonds could be worth $35 trillion if commodities, real estate, and bonds return to historic norms in 2022.  

He stated that, although the markets had suffered during the COVID epidemic, Federal Reserves guidelines rallied them by lowering interest rates. The market was unflinching towards any external force and he called it “the vampire bullmarket”. 

A bull market describes when prices go up for a specific period. 

“You shoot it with QE, and you stab it using COVID.” [quantitative easing]Grantham wrote, “And the promise of higher rates. And you poison it with unexpected inflation… and still the creature flees.” 

It is this: ‘Until, just like you are beginning to believe the thing is totally immortal, it eventually, possibly a little anticlimactically, keels over, and dies.

Grantham blamed Federal Reserve and financial officials for creating the “superbubble” during the pandemic. They lowered interest rates, affected mortgage rates, and created a judiciously exaggerated view of real wealth.

Grantham blamed the Federal Reserve to the coming 'superbubble' pop, which he likened to the pops already seen in the US and Japan. He warned that the US markets could lose $35 trillion in value once the Fed raises interest rates

Grantham compared the Federal Reserve’s upcoming’superbubble pop’ to those already experienced in Japan and the US. After the Fed raised interest rates, Grantham predicted that US markets would lose $35 trillion.

The bubble will burst once interest rates and realist market behavior return to normal, he said.  

He wrote, “Then, when bubbles burst, they crush most dreams and accelerate negative economic forces along the way down.”   

“To permit bubbles is just bad economic policy. 

Grantham claimed that this was a trend the U.S. already saw before the Great Depression, 2000 tech bubble popping and 2008 housing crash. 

He said Japan had experienced its own collapse under the same conditions as during their bubble popping in 1989. 

Grantham warned that the newest crash would come sooner rather than later in 2022 following the poor showings in the Dow Jones, S&P 500 and Nasdaq Composite this month.

The Dow Jones, S&P 500 and Nasdaq Composite had poor showing in the previous month

The Dow Jones, S&P 500 and Nasdaq Composite had poor showing in the previous month

Dow Jones experienced a quick rally beginning January. Shares reached nearly $36,799.65 and then fell to $34,366.28 at Friday’s close. That is almost a 7 percent decline. 

The S&P 500 also saw a short-live rally in the first few days of January as shares went up to $4,796.56 before dropping by about 8 percent to $4,404.34 on Friday afternoon.  

Nasdaq shares plunged more than 12% in the month ending March. The stock dropped from $210.01 to $177.36 on Friday afternoon.  

This comes at a time when stocks were experiencing their worst week for months on Friday.  

Next week’s Federal Reserve meeting is underway and investors will be looking for guidance from them on how they plan to increase interest rates. Economist expect them to steer markets to a quarter-percentage-point March rate hike, CNBC reported. 

To combat the 7 percent annual inflation rate, which is the highest in over 40 years, the Federal Reserve will likely raise its benchmark interest rates 4 times this year.   

Although higher interest rates might put a damper to rising prices they also will raise rates for consumers borrowing, such as credit cards and mortgages.

Annual inflation hit 7% in December, the highest 12-month increase since June 1982

Inflation reached 7% in December. This was the 12th highest increase in 12-months since June 1982.