Being too bearish in this pandemic-stricken U.S. stock market can be costly.
That is apparently the lesson that Jeremy Grantham, co-founder and chief investment strategist at Boston-based money manager Grantham, Mayo, Van Otterloo & Co., learned this year as his fund has seen clients pull billions of dollars from his flagship fund as it has badly trailed the broader stock market.
GMO trails the S&P 500 index by 14 percentage points, according to a report by Bloomberg News on Tuesday. The business outlet reported that clients have pulled $2.2 billion from the fund so far in 2020.
Gratham has been painting a very dire picture of the investment landscape in the U.S., suggesting that rampant trading by out-of-work investors and speculative fervor reflects a market that may be the most bubbly he’s seen in his storied career.
However, markets have not quite complied with his grim outlook, rebounding at a historic pace in certain segments.
The S&P 500 index
is up 12.2% so far this year, the Dow
has gained nearly 5% over the period and the Nasdaq Composite Index
has climbed just shy of 35% in the year to date, with all three benchmarks trading at or near all-time highs.
And even woebegone, small-capitalization stocks, which have been hit particularly hard by the COVID-19 health crisis, have mounted a decisive rebound, up nearly 10% on the year and trading in record territory.
Back in June, one of GMO’s key investment officers, Ben Inker, told investors that it was time to sell stocks, in a client letter, cited by Bloomberg. Inker suggested to Bloomberg that investing is no easy game.
“The cruel logic of being a value manager is that at the very time when your opportunities are at their best, your credibility with clients is at its lowest ebb,” he was quoted as saying.
A call by MarketWatch to Grantham’s office in Boston wasn’t immediately returned.