Is today's market exuberance rational?

Despite all the policy-induced uncertainty wrought by President Donald Trump’s administration, US stock markets seem to be sending a message of normalization, Major indexes have returned to where they were at the beginning of the year and continued to rise.

- Hervé Goulletquer

What is going on? Are these new highs credible?

I think not. For starters, despite Trump’s recent policy reversals, uncertainty remains high, feeding fears that business and household confidence will suffer, slowing growth over time. Moreover, Trump is far from having completed his attempted trade negotiations and is nowhere closer to his stated goal of balancing the US’ external account. So large-scale an undertaking would require the world’s major powers to adjust their own savings-investment patterns and relationships visa-vis the US. Getting that to happen would entail an extraordinarily painful exercise, assuming it is possible at all.

Lastly, the Trump administration’s agenda needs to be considered in the deeper context of what the French economist and historian Arnaud Orain calls “finitude capitalism.” Orain distinguishes “between an open world carrying a promise of all-round and unlimited enrichment (for states, private companies, or individuals) and an ideology which argues the opposite — that the world is finite, that natural resources and global exports are in limited quantity, which entails that overall enrichment is limited, and even impossible.”

When the outside world seems to present fewer opportunities than risks, it becomes necessary to defend one’s territory. But if the economic system becomes less optimized and efficient as a result of this, so be it.