Jeremy Grantham Warns U.S. Stocks Could Plunge 70% in the Most Expensive Market in History

Jeremy Grantham, the co-founder and semipermanent concern strategist astatine GMO Asset Management, returned to CNBC Squawk Box with 1 of the bleakest marketplace calls of his career. Grantham, who says GMO manages astir $85 billion, called this "the astir costly marketplace successful American history" and warned that a reversion to inclination would beryllium person to a wipeout than a regular correction.

Grantham says the eventual peak-to-trough diminution is "closer to a 70% decline" than a 50% drop. He stresses that the timing of specified a determination is inherently uncertain, placing the model anywhere from astir 2 weeks to 2 years. It mightiness beryllium astute for investors to work his informing arsenic a thesis from a salient bubble-caller, not needfully a warrant that the marketplace volition diminution anytime soon.

Why Grantham Thinks Valuations Are Historically Stretched

Grantham's valuation assertion leans connected a agelong humanities baseline. He says the market's price-to-earnings ratio has averaged more than 60% higher from 2010 to contiguous than during the anterior 100 years, a persistent premium helium attributes successful portion to a agelong long of unusually inexpensive money.

However, the 10-year Treasury output sits astatine 4.41% arsenic of June 24, 2026, successful the 81.5th percentile of its trailing 12-month range. The national funds complaint people precocious bound is 3.75%, wherever it has been held dependable since December 11, 2025. Inflation, meanwhile, has continued to grind higher, with CPI reaching 333.979 successful May 2026, the precocious of the trailing year.

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The Two-Sigma Bubble Framework

Grantham anchors his carnivore lawsuit successful a statistical model helium calls a "two sigma" threshold. He says that each 26 erstwhile marketplace bubbles that reached this threshold yet fell backmost toward their humanities trend, making today's valuations particularly concerning successful his view.

He draws his closest examination to the dot-com peak. Grantham says today's setup astir resembles the 2000 tech bubble, but argues the numbers look worse now. On his way grounds from that era, Grantham notes helium called a 70-75% NASDAQ diminution successful 2000, and the scale yet fell 82%.