It will be hard to satisfy both populists and businesses. HAVE investors become irrationally exuberant?

That is the biggest question hanging over global stockmarkets. Despite tumultuous politics across much of the rich world, share prices are reaching ever loftier heights. After breaking the 20, barrier in January, the Dow Jones Industrial Average swiftly passed 21, earlier this month. In Britain the FTSE has been notching up fresh records, too. The MSCI World Index has hit an all-time high. At first sight, the warning signals are flashing.

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By historical standards, valuations in the American market are worryingly dear. The cyclically adjusted price-earnings ratio, which averages profits over ten years, is just under 30, according to Robert Shiller of Yale University.

Only twice has it been higher—in the late s, during the internet boom, and just before the crash of There are three reasons why investors are ignoring the alarm bells, each of them reasonable. In it fell. Nor have investors bet the farm on shares. After suffering net outflows for the previous 12 months, equity mutual funds in America recorded their first week of net inflows in February. That same month a Bank of America Merrill Lynch survey of fund managers found that they held more cash than usual.

Investors have a negative view on government bonds: Equities look attractive in comparison. Second, there are indications of a pickup in the global economy. That is a big change from the start ofwhen investors were preoccupied by the state of the Chinese economy and the threat of deflation. After a feeble performance over the past few years, with annual growth in trade volumes barely keeping pace with GDP, the signs are that global trade is picking up again. Even European growth forecasts have been revised higher.

Third, expectations of tax cuts, infrastructure spending and deregulation from the Trump administration have invigorated animal spirits in America. In December American small-business confidence saw its biggest rise in nearly 40 years, according to the National Federation of Independent Business. The risks to this happy prospect are manifold, however. Despite the strong tone of surveys, the recent economic data in America have been mixed: After eight years, this recovery is already long in the tooth.

Meanwhile, monetary policy, which has played a big role in supporting stockmarkets sinceis becoming less accommodating. The Federal Reserve is widely expected to raise interest rates this month see article. The European Central Bank will scale back the volume of its como ganhar dinheiro no forex bond purchases in How to make money with horse betting. A deeper problem lies in a contradiction between politics and economics.

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Elections in the Netherlands, France and Germany this year will give voters the chance to hammer established parties. Just as with Mr Trump in America, workers are backing insurgent candidates because they want a bigger slice of the economic pie.

But mathematics cannot square a surge in real wages with a market manchester united stock market flotation based on the hope that profits will rise faster than GDP. As a movement that rejects globalisation, populism is a menace to companies that thrive on the free movement of goods, labour and capital. So it will be hard to keep both populist voters and the equity markets happy. Stocks may fly high for some time yet, but investors should keep a parachute handy.

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