Mar 14, 2017

Why investors don't see Trump as a risky bet

Richard Drew/AP

The biggest flip flop of the 2016 election belonged not to a politician, but the stock market, when after Election Day it changed its opinion of President Trump from a thin-skinned inciter of global crises to a tax-and-regulation cutting champion of business.

Why the complacency? Bloomberg News points out that despite high valuations and low market volatility, indexes of global policy uncertainty remain high. So why are investors ignoring the threats President Trump's confrontational nature poses for global trade? Ethan Harris, head of global economics research at Bank of America Merrill Lynch, tells Bloomberg:

  • Bearish forecasters are the boy who cried wolf, who are now being ignored. They warned that everything from the 2010 European debt crisis to the 2011 debt ceiling showdown and 2016's Brexit would hurt stocks, but they didn't in the long run.
  • When a crisis does occur, central banks have shown a willingness to do whatever it takes to stabilize the economy.
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