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

Harold Wilson was prime minister and Margaret Thatcher the newly elected leader of the opposition. Lord’s hosted the first cricket world cup final, David Bowie released Young Americans and inflation reached a post-war high of more than 25%. That was Britain in 1975, the last time the economy endured a double-dip recession. Until now, in all likelihood. When the Office for National Statistics releases growth figures for November next Friday the data is expected to show UK on course to contract in the final three months of 2020. An economy that was already losing momentum in the early autumn was further hampered by the four-week lockdown in England that ended in early December. Lockdown 3 – which came into force earlier this week – guarantees that the economy will beweaker still in the first three months of 2021, even if the government’s vaccination programme goes as planned and restrictions can be gradually eased from mid-February onwards. Two successive quarters of falling gross domestic product (GDP) are needed to qualify for a recession and a double-dip involves two recessions, separated by a small gap: something now highly probable, but not inevitable. Torsten Bell, the

The global economy has just had its worst year of the modern age and 2021 has not got off to the best of starts either. Yet stock markets appear impervious to bad news, with the MSCI world index of developed market shares 10% above its pre-crisis peak. There are a number of reasons why equity markets are so hot.Central bank action. Led by the US Federal Reserve, central banks were quick to respond to the market turmoil that accompanied the first wave of the pandemic in February and March last year. Interest rates were cut and money was pumped into the global economy through asset-purchase schemes known as quantitative easing. Just as importantly, the Fed gave the impression that it would not allow share prices on Wall Street to fall too far.Vaccine optimism. Stock markets tend to be influenced by the outlook in the future rather than the current state of the world, and are convinced that growth will pick up sharply once mass vaccine programmes allow governments to relax social distancing regulations. The assumption is that from the spring onwards activity will surge, leading to higher corporate earnings, which in turn would justify higher share prices.Bidenomics. The Dow Jones

The cost of importing containers filled with consumer goods from Asia into the UK has reached a record high after a surge in demand in the weeks before Christmas and the UK’s exit from the EU. Shipping experts believe the UK has been dealt a double blow by the impact of the coronavirus, which has disrupted global shipping supply chains, and the end of the Brexit transition period, which caused a large increase in imports in the last months of 2020. Container freight rates from Asia have increased almost fourfold since November to reach $10,000 for a 40ft unit for the first time, amid a global rebound in demand for consumer goods and materials, and congestion across UK ports, where many empty containers have been left stranded. Vincent Clerc, chief commercial officer for Maersk, the world’s biggest shipping company, said on Wednesday there were “simply not enough containers in the world to cope with the current demand”. He said that recent lockdowns in the UK and across Europe may even spur further online purchases of consumer goods such as home exercise equipment and furniture for “at least for some weeks … It is

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Retailers are calling for more financial support from the government after shopper numbers dived more than two-fifths last year.The number of people out and about on high streets, retail parks and in shopping centres fell more than 43% after government-imposed lockdowns intended to control the spread of the Covid-19 virus.Numbers nearly halved in the all-important “golden quarter” between October and December, according to the latest figures from the British Retail Consortium and analysts at ShopperTrak.London was the hardest hit in December, with footfall down 58% as it was among the first areas to be put under the tougher tier 4 restrictions, which involved closing most high street stores, pubs and restaurants. Retail parks, where stores tend to be more spacious and there is parking, fared better than high streets and shopping centres.Wales and the south-east of England were the next worst-hit areas, while the north-west had the best end to the year, with sales down 36%. Liverpool enjoyed a period with only limited restrictions after its widespread testing effort.Helen Dickinson, the chief executive of the British Retail Consortium trade body, called on the government to extend a property tax holiday for retailers as high street lockdowns on non-essential retailers, including

A few days into 2021, and a large European country imposed yet another lockdown on its weary public. The leader of the governing rightwing party held out hopes for a mass vaccination programme, but insisted that in the meantime, non-essential shops and services must close and school pupils study from home. Not the UK, but Germany. Not Boris Johnson, but Angela Merkel. Our overwhelmingly parochial political debate nearly always ignores how countries very similar to our own can take far more imaginative and helpful measures. One of the first moves Chancellor Merkel announced this week was an extra 10 days’ leave for parents to look after children – double that for single parents. As policymaking, it is a modest but useful step. As politics, it is smart. And as an attempt to gain beleaguered families’ trust and their acceptance of the inevitable difficulties to come, it is deft.Compare that with the tin-eared response from London’s ministers. The day after Mr Johnson’s imposition of a third lockdown, the chancellor, Rishi Sunak, unveiled a £4bn package of one-off grants for retail, hospitality and leisure companies. If your firm does the laundry for a big leisure centre or supplies crockery to cafes, you

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It says something about the current state of Britain that the economy has become a sideshow. At any other time, the prospect of a double-dip recession would be front-page news, but it is now merely a footnote to daily bulletins charting infection rates, hospitalisations and deaths.For the past year there has been a debate about whether lockdowns are worth the pain, once all the collateral damage – the cancelled cancer operations, the lost months of schooling for children who can ill afford it, the increased incidence of domestic abuse and mental health problems, the lengthening dole queues – is taken into account.That debate is now over. The risk of the NHS being overwhelmed has forced a return to restrictions almost as severe as those enacted last spring. Having blundered its way through 2020, the government felt it had no choice but to shut the schools and instruct people to stay at home.Make no mistake, there is an economic cost. The loss of output in late 2020 and early 2021 will be nothing like as severe as the 25% contraction suffered between February and April last year, but it will be bad enough. Businesses have been running down their cash reserves.

With the US president-elect Joe Biden’s incoming administration promising a fresh, rational approach to climate change, now is an ideal time to make the case for a World Carbon Bank that would transfer and coordinate aid and technical assistance to help developing countries decarbonise. The proposed Green New Deal in the US and the European commission’s European Green Deal have laudable environmental goals but are too inward-looking. When an entire building is burning, to concentrate firefighting resources on one floor would only delay, not prevent, its destruction. According to the International Energy Agency, almost all the net growth in carbon dioxide emissions over the next two decades will come from emerging markets. Although China recently pledged to achieve zero net emissions by 2060, it is sobering to consider that it accounts for half of the world’s coal output and half of its coal consumption. India, too, is highly dependent on its plentiful coal reserves, and will likely remain so despite strong advances in solar power. For all the fanfare accompanying the 2015 Paris climate agreement, the share of clean energy in global energy investment is still only about 34%, almost exactly the level