Jeremy Grantham is the co-founder and chief investment strategist of GMO. His letters are widely followed due to his decades of experience and ability to take a rational look at what is taking place in the financial markets.
I have provided his most recent letter below, but for those looking for the brief summary on where he feels the market is headed; he believes that the fair value of the S&P 500 is currently around 1100 based on the economic fundamentals that surround it. With the S&P 500 touching 1800 earlier this week that may create some concern for long term "value" investors (currently 75% overpriced).
However, due to the irrational exuberance surrounding the market today, he feels that stocks could melt up higher over the next year before they once again find gravity and we enter the third major crash of the last 15 years. His conclusion sums it up best:
“One of the more painful lessons in investing is that the prudent investor (or “value investor” if you prefer) almost invariably must forego plenty of fun at the top end of markets. This market is already no exception, but speculation can hurt prudence much more and probably will. Ah, that’s life. And with a Fed like ours it’s probably what we deserve.”
“Be prudent and you’ll probably forego gains. Be risky and you’ll probably make some more money, but you may be bushwhacked and, if you are, your excuses will look thin. Your call. We of course are making our call.”