Say goodbye to irrational despondency.
It came to a head in 2016 as investors -- seeing nothing but bad times ahead -- piled into government bonds that yielded less than they cost.
“It was the opposite of irrational exuberance,” said Joachim Fels, global economic adviser for Pacific Investment Management Co., referring to the phrase coined by then Federal Reserve Chairman Alan Greenspan in the late 1990s boom years. “Everyone was worshiping at the secular stagnation church” with its belief in scant economic growth.
Now, as 2017 approaches, investors, economists and policy makers are starting to focus more on what could go right with the global economy rather than just fretting about all the things that might go wrong.
Behind the lifting of the gloom: Hopes that a combination of easier fiscal policies, bigger wage gains and stepped-up business investment will break the world free of the slow-growth trap it’s been caught in for the last five years.
“The surprise going forward may well be far better times than anybody had expected,” said Allen Sinai, chief executive officer of Decision Economics Inc. in New York.
It starts with the U.S., where Donald Trump’s presidential election victory and a Republican sweep in Congress has raised expectations of big tax cuts and less regulation.
“The U.S. economy is going to be very strong,” said Kenneth Rogoff, the former chief economist at the International Monetary Fund who is now a Harvard University professor. “There will be a huge boost to business confidence.”
Ray Dalio, founder of Bridgewater Associates, wrote in a LinkedIn post Monday that Trump’s win could “ignite animal spirits” and that investors should expect bold changes because “by and large, deal-maker businessmen will be running the government.”
Wage Growth