Buy emerging markets and blue-chips, says Jeremy Grantham

As the global economy faces threats from every corner, stay safe with high-quality blue chips from around the world, says veteran fund manager Jeremy Grantham.

If you want to make money in these markets, you want a fund manager with a few grey hairs. "This is no market for young men," says veteran investor Jeremy Grantham, 72.

As Grantham, chairman of US fund manager GMO, tells Marketwatch's Jonathan Burton: "At least us old men remember what a real bear market is like, and the young men haven't got a clue."

There are plenty of problems with the global economy, but the biggest threat is that if any one of them erupts into a crisis, it could ignite the rest.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

"We have these basically distinct problems joined only by a general fragility of the financial system. So you can't know for sure that if China stumbled it wouldn't set off something else, or if the US goes into a double-dip [recession], it won't set off a European bank failure."

Grantham points the finger at central bankers, politicians, and big banks, as he has done regularly both before and after the 2008 crash.

"No one has been prepared to make tough decisions. Where have the Europeans been for ten years? None of these things came out of the woodwork two weeks ago. No one attempted to blow the whistle and make tough decisions in a timely fashion."

As for the US, rising income inequality is a serious problem: "We have actually made the tax structure friendlier to the top 10%" in recent years, he says. And the Fed punishing savers in the hope of bailing out speculators and debtors is only making things worse. "You can't run the economy on BMWs alone - if the average person is in a pickle, how do you have a healthy economy?"

He favours building a portfolio of 'high-quality blue chips' from around the world with dividend-paying emerging market and Japanese stocks a particular favourite. However, he warns that stocks could get even cheaper from here, if any of the big problems facing the economy get worse.

James McKeigue

James graduated from Keele University with a BA (Hons) in English literature and history, and has a certificate in journalism from the NCTJ. James has worked as a freelance journalist in various Latin American countries.He also had a spell at ITV, as welll as wring for Television Business International and covering the European equity markets for the London bureau. James has travelled extensively in emerging markets, reporting for international energy magazines such as Oil and Gas Investor, and institutional publications such as the Commonwealth Business Environment Report. He is currently the managing editor of LatAm INVESTOR, the UK's only Latin American finance magazine.