Nine Reasons Why the Stock Markets Are Far Too Optimistic
— November 21, 2019
By Nouriel Roubini
The sudden shift from risk-off to risk-on reflects four positive developments. First, the US and China are likely to reach a “phase-one” deal that would at least temporarily halt any further escalation of their trade and technology war. Second, despite the uncertainty surrounding the UK’s election on 12 December, Prime Minister Boris Johnson has at least managed to secure a tentative “soft Brexit” deal with the EU, and the chances of the UK crashing out of the bloc have been substantially reduced.
Third, the US has demonstrated restraint in the face of Iranian provocations in the Middle East, with President Donald Trump realising that surgical strikes against that country could result in a full-scale war and a severe oil-price spike. And, lastly, the US Federal Reserve, the European Central Bank, and other major central banks have gotten ahead of geopolitical headwinds by easing monetary policies. With central banks once again coming to the rescue, even minor “green shoots” – such as the stabilisation of the US manufacturing sector and the resilience of services and consumption growth – have been taken as a harbinger of renewed global expansion.
Read the full article in The Guardian.
Nouriel Roubini is a Professor of Economics and International Business and the Robert Stansky Research Faculty Fellow.