Superbubbles first form, then suffer a setback with valuations taking a half-step back, as occurred in the first half of 2022.

The claim has two parts: (a) superbubbles typically form and then suffer a partial setback, with valuations taking about a half-step back; (b) such a setback happened in the first half of 2022. TRUE: the first half of 2022 saw a major fall in valuations in the bubble assets Grantham named (e.g. the S&P 500 fell about 20% and forward P/E ratios contracted sharply, with similar falls in bonds or speculative assets), leaving valuations still above long-term norms. Grantham's documented pattern of earlier superbubbles (1929, 2000, Japan 1989, US housing 2006) should also show such an interim setback. MOSTLY TRUE: the 2022 setback is clear, but the historical pattern holds only for most past episodes, or the size of the setback is somewhat off. MIXED: the 2022 setback occurred, but the claimed general pattern is not supported by the historical record. MOSTLY FALSE: valuations dipped only modestly (well under 10%) in the first half of 2022, and calling it a setback overstates it. FALSE: valuations did not fall in the first half of 2022.

Set before the research began.

1. E1 Looking Back, Looking Forward – 2022Q2 - Applied Finance Applied Finance · 21 July 2022

   “State of the market: With the SP500 declining 20% in the first 6 months of the year, the forward 12- month P/E ratio for the S&P 500 declined to ~16 times, close to its 10 and 20-year average of 15.5 times.”

2. E2 Predicting Equity Returns Using the CAPE Ratio Robert J. Shiller and Laurence Black (RSBB-I, LLC) · July 2022

   “The CAPE Ratio climbed to 38 in late 2021, the third highest on record. It fell to 28.9 in early July and remains higher than historical averages.”

3. E3 Predicting Equity Returns Using the CAPE Ratio Robert J. Shiller and Laurence Black (RSBB-I, LLC) · July 2022

   “With equities and bonds down the most since the early 1970s, we have seen CAPE Ratios fall from recent highs.”

4. E4 ENTERING THE SUPERBUBBLE'S FINAL ACT GMO (Jeremy Grantham) · 31 August 2022 Own record

   “My theory is that the breaking of these superbubbles takes multiple stages.”

The independent evidence shows that valuations fell sharply in the first half of 2022 and stayed above historical averages: the S&P 500 fell 20% and the CAPE ratio fell from 38 to 28.9 [E1][E2][E3]. No evidence item tests whether earlier superbubbles had a similar interim setback; the only support for that pattern is Grantham's own statement [E4]. The criteria need that historical check to choose between true, mostly true and mixed, so the evidence does not settle the claim.