Jeremy Grantham has a good record when it comes to big calls. The co-founder of investment managers GMO not only warned that the housing bubble of the 2000s would burst, but also turned positive on US stocks just as they bottomed in March 2009. He has also said that he expects this central-bank-induced rally to "end badly". But he doesn't think this year's ructions mark the beginning of the end. This, he says, "feels at worst like an ordinary bear market lasting a few months, and not like a major collapse".
Why? The bears are underestimating the growth potential of America and global economies this year. The "slow-burning but huge positive of much-reduced resource prices in the US" means annual growth of 2.5% is "quite attainable" in 2016. Cheaper petrol and heating will be a particular boon to "the group that has been hurting for 30 years", the median wage earners. That implies healthy consumption. The boost from cheaper oil takes time to come through as households rebuild their savings first, but markets are underestimating this important tailwind. Solid US growth will bolster the pace globally.
In short, this is not the sort of backdrop usually associated with nasty collapses. But another reason to think that this is not the "Big One" is the absence of "a fully fledged blow-off". The last market peak in 2007 was marked by an overstretched economy and a frenzy amid individual investors. A real market top comes with "crazy speculative anecdotes for your grandchildren". This rally isn't over yet.
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