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The “Trump bounce” will end

The markets have made two assumptions—both questionable

By James Kwak  

President Donald Trump ©Evan Golub Zuma Press/PA Images

The US stock market is giddy. The S&P 500 index has enjoyed a virtually uninterrupted climb of 10.9 per cent since Donald Trump’s election on 8th November. Economist Robert Shiller’s cyclically adjusted price-to-earnings ratio (a measure of the price of companies’ stocks relative to their profits) is at levels previously seen only in the technology bubble of 2000 and just before the crash of 1929. This is unlikely to last.

The “Trump bounce” seems to be based on two premises. The…

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