Ever since Donald Trump won the US presidential election, American stock markets have been reaching for the sky.
But could it be that this optimism will be justified only if Trump fails to implement his policies, for the simple reason that America was already doing quite well before Trump came along?
If so, then the good news of Trump’s first few weeks as president is that Washington seems to be stuck in political gridlock, as it was in the Obama years.
Take Speaker Paul Ryan’s plan to impose border taxes. Most Republican representatives back the plan, but a large number of senators, including those from Walmart’s home state, Arkansas, are bitterly opposed, since it would raise the price of goods in stores.
Yet without Ryan’s plan, it is hard to see how Trump could finance his defence and infrastructure splurge, without vastly increasing federal borrowing – breaking another conservative taboo.
And then there is tax reform. In his speech to Congress, Trump said that tax reform would have to come after plans to replace Obamacare. But replacing Obamacare is predictably proving much more difficult than Trump expected.
In short, many of Trump’s hallmark policies are proving impossible to deliver. This is why Trump’s agenda is still shrouded in mystery at a stage in the presidency when Obama had already passed an $800bn stimulus bill, and George W. Bush had announced full details of his tax and budget reforms.
But why should the markets be cheering? Maybe because President Obama’s legacy to his successor was a strong economy, as evidenced by the seven years of consecutive growth, and a stock market already hitting records, Trump or no Trump.
But how long will the good times last? At this stage of the cycle, interest rates need to rise and fiscal policy has to be tightened to keep inflation and long-term structural deficits under control. Yet Trump and Congress will presumably agree sooner or later on tax cuts of some kind, and also higher government spending. Is Trump really the president to match such budget-busting measures with productivity-enhancing reforms that would keep inflation and government deficits under control? I don’t think so.