
Insurrections are not usually seen by investors as buy signals. Yet even as rioters stormed the seat of US legislative government last week, stock market indices hit new highs in New York, adding another chapter to 12 months of apparent defiance of economic gravity. Wall Street, measured by the benchmark S&P 500, was not alone in starting 2021 with a bang. London’s FTSE 100 jumped by more than 6% in the first week of the year as investors took in a heady cocktail of a President Joe Biden ready and able to spend money, cheap borrowing costs, and the hopes that vaccines will end the coronavirus lockdowns. Yet amid the exuberance a serious concern looms: are we on the cusp of another colossal crash? Some veteran investors believe so. Jeremy Grantham, the British co-founder of the US investment firm GMO, gave some of his fellow investors pause last week when he described “a fully fledged epic bubble” that has grown out of the recovery from the financial crisis of 2008-09. “Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behaviour, I believe this event will be recorded as one of