Despite misguided economic policies and rising geopolitical tensions, the long market expansion has prevailed. But times may be changing.
With the Trump fiscal policies and rearmament, America is taking more debt than in decades, even though its sovereign debt now exceeds $21.2 trillion, or 106 percent of the GDP. As fiscal stimulus kicks in (read: Trump's tax cuts), the deficit will widen.
The US is now the only major advanced economy that's expected to see a rise in the debt-to-GDP ratio over the next 5 years (almost 10%!). The huge leverage relies on the continued willingness of other countries to finance America's imbalances, even as US debt held by other countries already hovers around $6.4 trillion.
Meanwhile, the Sino-US bilateral friction continues, along with talks on the North American Free Trade Agreement (NAFTA) with Canada and Mexico, and on tariffs with the EU. In Europe, political winds are rising, despite cyclical recovery. In Germany, Chancellor Merkel's rule is more constrained politically. Italy is heading to elections in which the old center has been played out. In France, May riots indicate Macron's liabilities. And volatility is escalating in the post-Brexit UK…