"So how? How you think the markets are going to go?" As always, I have to reply him that I have no idea because if I did, I probably either wouldn’t have to get a job or I wouldn’t be doing the job that I’m doing now. This is probably the curse of a student of economics and a fan of the stock markets.
As it stands right now, I’m not optimistic about the economy and even less about the stock markets. Why?
The simple reason I gave my friend is that for many years, big investment banks were hiring the brightest brains in the world and these brightest brains in the world engaged in a game of musical chairs where toxic assets were shifted off balance sheets, diced up into complex instruments and packaged off as relatively low risk investments to ‘investors’ who didn’t know better. So, if the world (the financial one at least) expected a financial crisis that exploded over the whole world to suddenly turn for the better just because a POTUS (albeit being one with very good oratorical skills) says so (with the backing of some bright minds though), I think the world is being naive.
After all, let’s review some of the steps that the world has taken so far. Interest rates have been kept low. The US government has upped their spending to levels never seen before (and on still costly but not useful stuff like the war in Afghan). The latest is that the US has turned protectionist and China threatens to retaliate.
There are also signs that the recent growth seen in the latest quarterly figures are nothing more than due to inventory re-stocking corrections (link) and trade is still a mystery waiting to be solved (link).
So, as things stand now, I really think that the markets are ruled by optimism more than anything else because as far as economic fundamentals go, the light at the end of the tunnel still seems a little faint to me.