Investing in a New Era of Global Tensions

Vitaliy KatsenelsonAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

You don’t have to worry about the market and its crazy valuations. That’s your neighbor’s problem, not yours. In building your portfolio, we are aiming for resilience.

Jeremy Grantham, co-founder of GMO, is a voice of sanity in a world that is becoming less sane, one TikTok at a time. He wrote in his latest letter:

As for the U.S. market in general, there has never been a sustained rally starting from a 34 Shiller P/E. The only bull markets that continued up from levels like this were the last 18 months in Japan until 1989, and the U.S. tech bubble of 1998 and 1999, and we know how those ended.

The simple rule is you can’t get blood out of a stone. If you double the price of an asset, you halve its future return. The long-run prospects for the broad U.S. stock market here look as poor as almost any other time in history. (Again, a very rare exception was 1998-2000, which was followed by a lost decade and a half for stocks. And on some data, 1929, which was famously followed by the Great Depression.

I agree.

You have probably noticed that your portfolio looks nothing like the stock market or a traditional lazy, garden-variety portfolio. For the most part, it consists of undervalued cockroaches – companies that should survive anything the global environment throws at them. I know that isn’t the image you wanted to start right off with when you poured a glass of wine and sat down to read this letter.