GMO's Inker Blames the Fed for the Asset Bubble
The firm’s head of asset allocation says never before have markets seen this level of monetary and fiscal stimulus.
Why is it so challenging to determine precisely where we are in the market cycle? The reason for the difficulty, according to Ben Inker, the head of asset allocation at GMO, is because the U.S. has never had this amount of monetary and fiscal stimulus at the same time. The result is that low-risk assets have lower return expectations, but high-risk assets soar. There are obvious signs of froth — GameStop, Bitcoin and Tesla, for example - but even “small cap value” has been in demand. Inker believes an asset bubble has developed, which he blames on Federal Reserve monetary policy.
GMO is a legendary Boston-based institutional investment firm that manages about $60 billion in assets. During the dot-com implosion, GMO’s U.S. Aggressive Long/Short Strategy achieved better than 80% cumulative net returns for clients.