What Jeremy Grantham is not telling you about a US stock market bubble

Recently, veteran fund manager Jeremy Grantham made headlines for suggesting US markets could be in a bubble. He wrote that we should brace ourselves for a possible near-term melt-up. And then Grantham detailed how much of a melt-up would be enough to confirm a bubble.

The interesting bit was his recommendation that investors rotate out of the US stocks. The market veteran says US stocks offer a poor relative value. Instead of US stocks, Grantham recommends investors increase their allocation in emerging markets and even developed economy stocks.

There are a few problems with this recommendation. First, there is home country bias. That's the natural tendency for investors to put their money in domestic markets. People feel comfortable with domestic equities because they recognize the...


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