Anatole Kaletsky: I was wrong to be bearish on stocks

There are “three clear reasons” for equity markets to keep climbing, says Anatole Kaletsky, chief economist at Gavekal.

“I was wrong to turn bearish,” says Anatole Kaletsky, the self-proclaimed “perma-bull” commentator who became unusually downbeat when the Covid-19 crisis hit. In March, as the sell-off in most assets reached the bottom, he argued that it was “too early to buy equities”. And just a couple of months ago, he was dismissing the rapid rally as “market madness” driven by a flood of bored gamblers who had turned to stocks when they couldn’t bet on sports during lockdown. But more recently his optimism has been restored: there are now “three clear reasons” why “equity markets are more likely to continue moving higher than to retest their lows, even if the world is hit by another wave of Covid”.

One is that “the scale and speed of fiscal stimulus and monetary expansion … turned out to be far larger than I ever imagined politically possible”. This has averted “economic disaster”.  Second, while these policies are not guaranteed to return the world economy to normality within two years (although the odds they do are fairly good), for now investors seem to have “100% conviction” that they will. That belief can’t really be proved wrong for at least a year or so. But most importantly, there’s good reason to hope that this crisis will produce a “structurally stronger world economy” in the coming decade, rather than the weak growth and high unemployment that many fear. Governments have now “enthusiastically embraced” Keynesian economic policies; if this persists, it will drive “a boom in long-term investment”.

Recommended

Britain’s ten most-hated shares – w/e 1 July
Stocks and shares

Britain’s ten most-hated shares – w/e 1 July

Rupert Hargreaves looks at Britain's ten most-hated shares, and what short-sellers are looking at now.
4 Jul 2022
Britain’s most-bought shares w/e 1 July
Stocks and shares

Britain’s most-bought shares w/e 1 July

A look at Britain’s most-bought shares in the week ending 1 July, providing an insight into how investors are thinking and where opportunities may lie…
4 Jul 2022
M&G offers a solid 10.1% yield – but future growth is uncertain
Share tips

M&G offers a solid 10.1% yield – but future growth is uncertain

Financial services group M&G has one of the highest dividend yields in the FTSE 100. But it’s a complicated company, and a tough one to analyse, says …
4 Jul 2022
We’re doing well on pensions – but we still need to do better
Pensions

We’re doing well on pensions – but we still need to do better

Pensions auto-enrolment has vastly increased the number of people in the UK with retirement savings. But we’re still not engaged enough, says Merryn S…
4 Jul 2022

Most Popular

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks
European stockmarkets

Ray Dalio’s shrewd $10bn bet on the collapse of European stocks

Ray Dalio’s Bridgewater hedge fund is putting its money on a collapse in European stocks. It’s likely to pay off, says Matthew Lynn.
3 Jul 2022
UK house prices are definitely cooling off – but are they heading for a fall?
House prices

UK house prices are definitely cooling off – but are they heading for a fall?

UK house prices hit a fresh high in June, but as interest rates start to rise, the market is cooling John Stepek assesses just how much of an effect h…
30 Jun 2022
How to invest in copper, the most important metal in the world
Industrial metals

How to invest in copper, the most important metal in the world

As the world looks to electrify and try to move away from fossil fuels, copper looks set to be the biggest beneficiary. But how can you invest? Rupert…
30 Jun 2022