Specifically, the implementation of a well-designed set of policies built around the president’s three headline initiatives -- tax reform, deregulation and infrastructure -- would unleash reflationary forces that would validate existing asset valuation, and could take them a lot higher if the rest of the world were also to improve its policy mix. If, however, the U.S. stumbled into protectionism and trade wars, the markets would give up more of the recent gains, and possibly even overshoot on the way down.
Where markets go from here is therefor is a matter of politics more than anything else, with both U.S. and international dimensions. I leave you to make the call. I will limit myself to a simple observation: Having patiently waited for quite a while, markets are now a lot twitchier and point to a period of greater volatility for traders and investors.
Mohamed A. El-Erian is a Bloomberg View columnist. He is the chief economic adviser at Allianz SE and chairman of the President’s Global Development Council, and he was chief executive and co-chief investment officer of Pimco.
This column was provided by Bloomberg News.