Loading ...What Grantham is discussing is also a reflection of one of Bob Farrell’s 10 investment rules. (Farrell was former head of research at Merrill Lynch.) His rule number eight states the following:
“Bear markets have three stages—sharp down, reflexive rebound, and a drawn-out fundamental downtrend.”
As noted, the year 2022 started with a sharp and swift decline lasting well into midyear. With extremely bearish sentiment, it was no surprise that July and August saw an oversold bounce that retraced a portion of that decline. However, with that retracement now behind us, the concern is that the third phase of the superbubble has yet to commence. That third phase is a slower and more grinding decline that coincides with deteriorating fundamentals.
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