The outlook for the global economy and financial markets is mixed. The positives and upside include a pick-up in global growth after years of a new mediocre, profitable corporate firms, better business and consumer confidence, more optimistic investors with markets in risk-on mode, the rise of emerging markets, new technologies and innovation. The downside are however several: uncertainties about Trumponomics, the risks of European and Eurozone dis-integration, the potential for a hard landing of highly indebted China, the sluggish global growth and productivity in a world of high private and public debts, the frothiness in financial markets and the risks of assets and credit bubbles fed by easy monetary policies, the backlash against globalization and geopolitical risks. Markets are now bullish is not bubbly but the economies are still sluggish. Roubini argues that a new policy framework is needed to minimize the downsides and maximize the upsides.

Uncertainties remain about the economic policies of Trump and their impact on the US economy and markets. Since the presidential election investors have become bullish pushing financial markets to new highs while business and consumer confidence have risen in spite of still sluggish growth. Investors hope that fiscal stimulus, infrastructure spending, tax reform and deregulation will boost growth and markets. A honeymoon can continue for quite a while if positive policies are properly implemented. But markets may be overestimating Trump’s ability to deliver positive policy changes and the impact of such changes on a potential growth that is kept low by longer term and structural forces. Markets may also be underestimating some of the potential negatives of Trumponomics: protectionism and the risk of trade wars; restrictions to migration that may slow growth in an ageing society; inefficient micro-management of the decisions of the corporate sector on where to produce, invest and hire; a sub-optimal policy mix with loose fiscal policy in an economy close to full employment that will force the Fed to tighten sooner and more; that could lead to higher interest rates and a stronger dollar that will hurt jobs and growth. Roubini argues that the jury is still out on whether Trumponomics will be more populist and protectionist or more mainstream and pragmatic, even if the latter scenario looks more likely.