📈  Chart of the Week 10/13/2024
By Mike Allison
After such a prolonged period of strong equity performance over the last 15 years, it’s worth looking back to see if we might gain some historical perspective about where the market has been and where it might be headed.
This week’s Chart comes courtesy of GMO and their co-founder and perma-bear, Jeremy Grantham. I’ve followed Jeremy’s career for a very long time and he has never seen a bull market he liked or thought was justified on valuation.
However, the Chart does make one wonder if we might experience a multi-year period of poor equity returns. If so, what would the investment backdrop be to drive such an outcome?
Could it be deflation akin to the 1930s? Inflation like the 1970s? Neither? Both?
Slowing population growth and ultimately outright population decline across the developed world will almost certainly be deflationary (see Japan).
On the other hand, the amount of (mostly government) debt outstanding continues to grow and a rapidly growing money supply is ultimately inflationary.
Perhaps these two macro forces will cancel each other out. That would, in some sense, be the best case for investors.
That said, there is a pretty reasonable case to be made that investment returns could be more tepid in the coming years than in the past decade and a half.
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