"The important point to note here is the historical deviation between exuberance and economic realities has generally NOT been resolved by reality catching up with fantasy. It has always been the other way around."
We can only surmise how this eventually turns out. But whether it is extremely suppressed volatility, extreme long positions in small-cap stocks or historical short positions in bonds, the “rubber band” is stretched very tightly. Of course, while “Trump-xuberance” currently reigns, there seems to be nothing to worry about. But then again, maybe that is exactly what we should be worrying about.
"It comes from Fight Club: 'You are not special. You are not a beautiful and unique snowflake'... I stand by it... The modern Left is always reacting to things...There is a kind of new Victorianism..."
The only other time in history where the Dow advanced 5000 points over a 24-month period was during the 1998-1999 period of “irrational exuberance” as the Fed was fighting the fears an inflationary advance, while valuations were rising and GDP growth rates were slowing. Maybe it’s just coincidence. Maybe “this time is different.” Or it could just be the inevitable beginning of the ending of the current bull market cycle.
It has been interesting to watch market participants swing from “Trump The Terrible” to “Trump The Great” in relation to the markets and economy and he isn’t even in office yet. But while Trump certainly has an extensive list of actions for his first 100-days, there are many headwinds to actual policy implementation and ultimately their success.