Even a new year can't shake the bearishness from GMO's Jeremy Grantham, who said in a Tuesday letter that the stock market will drop another 20% this year.

Grantham said the ongoing deterioration of financial conditions will be capped off by a downturn in the housing market, representing the "final phase" of the stock market bubble that should help drive the S&P 500 to 3,200 by year-end.

In a worst-case scenario, Grantham sees the S&P 500 falling as much as 50% to about 2,000.