British Investor Who Predicted US Slump Warns of Next Crash

Jeremy Grantham has gone from being the “skunk at the garden party” to a modern-day Cassandra, warning of looming market crashes

Glenn Burgess

Doncaster, a city in South Yorkshire, is far from the tall skyscrapers of Boston, Massachusetts, but both places are home to British investor Jeremy Grantham.

Grantham, now 86, is one of Britain’s most successful investors. He made his mark on Wall Street in the 1960s at GMO, a Boston-based investment company managing $63 billion (£49bn), which still carries his name.

Often compared to Warren Buffett, known as the “Oracle of Omaha,” Grantham has built a reputation for predicting stock market crashes, earning him the label of a pessimist in financial circles.

Jeremy Grantham is known for predicting big market crashes, like dotcom bust, even when his clients didn’t want to hear it. People have called him “the skunk at the garden party” for being negative when markets are booming.

But after US markets dropped sharply last week, Grantham is no longer seen as just a pessimist — now he seems more like a prophet whose warnings should have been taken seriously.

He says he has studied 300 financial bubbles in history, from England’s canal and railway booms during the Industrial Revolution to today’s AI surge. His long-time prediction that the AI bubble would burst seems to be coming true.

On Monday, the Nasdaq dropped a massive 4%, its biggest fall in three years. The S&P 500, which tracks America’s largest companies, is down 10% from its peak on February 19, wiping out $5.2 trillion (£4 trillion) in value.

Like Warren Buffett, who built up a $344bn cash reserve by selling stocks before the crash, Jeremy Grantham seems to have made the right call.

For months, Grantham warned that the “magnificent seven” — Google, Meta, Tesla, Nvidia, Apple, Microsoft, and Amazon — were dangerously overvalued, along with the broader US stock market.

“This [US stock market] has become a super bubble. The bigger and higher it goes, the more exciting and risky it becomes,” he said last month.

While he believes AI will change the world, he compared the current AI-driven market surge to the UK railway boom in the 19th century. Britain still has its railways, he says, but the investors back then were “wiped out.”

As AI-related stocks soared, Grantham stood alone in his cautious outlook. Since the rise of AI hype in late 2022 after ChatGPT’s launch, Nvidia shares jumped 900% & even established companies like Amazon climbed 176%.

Many other skeptics gave in as AI stocks skyrocketed, but Grantham, true to his Yorkshire roots, held firm.

However, despite his warnings, he never predicted what would trigger the market’s fall. Strangely enough, that push came from US President Donald Trump and his aggressive economic policies.

When Trump took office, it seemed unlikely that Grantham’s bubble theory would come true. Deregulation and tax cuts fueled a market surge, pushing stocks to new highs.

But recently, markets have reversed, with AI stocks taking the hardest hit — Nvidia shares have fallen 16% over the past month.

Jeremy Grantham might have a transatlantic accent, but his Yorkshire roots still shape his approach to investing. He follows a “value” style, aiming to buy stocks when they’re cheap, hoping they’ll rise over time.

In his early investing days, Grantham made millions betting on US stocks in the late 1960s, only to lose it all in a market crash. It was a tough lesson.

“It taught me that speculating in crazy stuff wasn’t a great idea,” he said in a Bloomberg podcast last month. “I went back to my Yorkshire roots of ‘waste not, want not,’ and focused on value.”

Born before World War II, Grantham grew up in the coal-mining town of Doncaster. After graduating from the University of Sheffield, he worked as a hospital supplies salesman — a job he called “the worst 18 months of my life.”

Seeking a new path, he moved to the US to study at Harvard Business School. This decision led him into the world of consulting and money management, a growing industry in Boston at the time.

In the late 1970s, he co-founded Grantham, Mayo, Van Otterloo (GMO), a firm that still reflects his cautious market outlook today, managing around $63 billion in investments.

Now, Grantham is warning of a new threat to the financial system — something he calls “toxicity.” He believes chemicals invented over the past 60 years, found in plastics, pesticides, shampoos, and perfumes, are silently poisoning people, much like lead in paint and gasoline did in the past.

In a paper published last week, he claimed these toxins could have serious consequences for global health and the economy.

Jeremy Grantham believes the most alarming effect of these chemicals is their impact on human health — causing drops in testosterone, libido, and sperm count, which he says is leading to fewer people having children.

According to Grantham, global births have fallen from 142 million to 130 million per year over the past 12 years, and the decline is expected to continue. He also warns that companies producing these chemicals could soon face a flood of lawsuits.

Not everyone is convinced by his dire predictions. One academic once said conversations with the 86-year-old left him in a “state of alarm” due to Grantham’s apocalyptic outlook.

But with markets still reeling from recent downturns, maybe a bit of Yorkshire realism is exactly what investors need.