So Anthony Bolton thinks this bull market could run and run? I hope he is right. He could be.
Repairs to the financial system appear to be holding and trade is picking up. While unemployment is continuing to climb, for those in work, life really is not that bad. And even if VAT is set to rise in the new year, we could well see some buying of big-ticket items brought forward to head off the extra cost. But are things really better?
It is hard at this stage to recall quite how depressed we all were just 12 months ago. The very sustainability of the capitalist system appeared in doubt. The credit crunch, which had started more than a year before, moved into overdrive in the wake of the Lehman Brothers’ collapse.Governments and central banks began pouring money into economies beset with a paralysis that threatened our very wellbeing.
It seems to have worked. True, there is a price to be paid but no one appears to be calculating the cost at present, yet the numbers are being published regularly.
The UK is approaching alarming levels of indebtedness and already plans are being drawn up to see what we can go without as a society. Talks of the welfare state moving into reverse gear may not be too far off the mark. All this will have an economic impact too.
The choice is stark. Pay more for your benefits (higher income tax and a host of other less high profile increases) or get less (free education and healthcare, child benefit, winter fuel subsidy and so on).
It will come to this in some measure but probably not in quite as dramatic a way as is being painted in some quarters. The economic price will be a slowing in the recovery that now seems to be under way.
What will this mean for investors? The good news is that the market appears to be behaving in much the way we have come to expect, even if the outcomes are not at all easy to foresee. The end of the downturn was signalled a full six months ahead of it taking place.
The continuing strength of equities – on both sides of the Atlantic – suggests that the market believes a proper recovery is under way.
So far so good but what if there is to be a second downward leg, the so-called W-shape recession and recovery?
My guess is that any subsequent downturn will be shallow but that is only a guess. The reason for so believing is that governments are desperately short of tax revenues right now so they will either treat any signs of economic fading with new stimulatory measures or, more likely, will postpone tightening until they are sure that the economy is back on an upward tack.
Which means that inflation will be the new enemy. Most economists believe interest rates will remain low for some little while. Perhaps they will. This could all take some time to play out but I will bet rates are held down too long simply because an early rise might choke off the recovery.
This will mean a return to boom/bust as governments try to head off a rising cost of living. This is not a bad scenario for financial assets. I can see where Anthony Bolton might be coming from.
Brian Tora (firstname.lastname@example.org) is principal of the Tora Partnership