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The signs are everywhere that investors are perhaps a bit too enthusiastic about the stock market.

Money has been flowing into exchange-traded funds like never before, helping to propel stocks higher. Indeed, as the Financial Times reports, $131 billion has flowed into these index-tracking funds in the first two months of 2017, according to ETFGI, a London-based consultancy.

This follows a record-breaking year in 2016, when ETF managers gathered more than $390bn in new cash. But the inflows of the first two months of this year alone already equal a third of last year’s total.

Moreover, the CBOE Volatility Index, a popular gauge of market fear, is trading near historic lows. Even the somewhat pretentious term -- “animal spirits” -- has come back with a vengeance in the financial media.

No doubt, a major catalyst for this market optimism is the election of Donald Trump and the hope that he, along with a GOP-controlled Congress, will achieve a trifecta of lower and simpler taxes, less regulation on several industries, and a massive infrastructure spending plan.

“The surge in business and consumer sentiment reflects an assumption that is deeply rooted in the American psyche: that deregulation and tax cuts always unleash transformative pro-growth entrepreneurship,” writes Mohamed El-Erian, the chief economic adviser at Allianz, the Germany-based corporate parent of Pimco, in a piece posted on MarketWatch.

But El-Erian points out that “sentiment is not always an accurate gauge of actual economic developments and prospects.”

He reminds us that Nobel laureate Robert J. Shiller, a Yale economist, has shown that optimism can evolve into “irrational exuberance,” whereby investors take asset valuations to levels that are divorced from economic fundamentals.

“They may be able to keep those valuations inflated for quite a while, but there is only so far that sentiment can take companies and economies,” adds El-Erian. “So far, the exuberant reaction of markets to Trump’s victory – all US stock indices have reached multiple record highs – has not been reflected in ‘hard data.’ Moreover, economic forecasters have made only modest upward revisions to their growth projections.”

El-Erian does concede that the US is on relatively strong footing to achieve higher economic growth. “But there is more to do,” he concludes. “Unless the Trump administration can work well with a cooperative Congress to translate market-motivating intentions into well-calibrated actions soon, the lagging hard data risks dragging down confidence, creating headwinds that extend well beyond financial volatility.”

Meanwhile, Nouriel Roubini, CEO of Roubini Macro Associates and an economist who gained fame for predicting the housing crash of 2007 and 2008, also believes that “[markets] are overestimating the positives of the US-Trump policies. Infrastructure, stimulus, deregulation, tax cuts: I think Trump will achieve much less on those dimensions.”

Roubini added that the policy mix for the U.S. also presents a challenge: Fiscal stimulus is going to force the Fed to tighten more, it’s going to push up interest rates and the dollar, he said, adding that “in a way it’s going to weaken the economy over time.”

He acknowledged that so called “animal spirits” may not dissipate anytime too soon.

“Over the next six to 12 months, maybe the positives are going to dominate because you have animal spirits, a build-up in consumer and business confidence, you’ll have some policy action. The economy is growing and hopefully those positives are going to stay for a while,” he said.

On the other hand, he adds, “the more there’s going to be trade friction, the more there will be restriction of migration, the more this stimulus is going to be excessive, forcing the Fed in a full-employment economy to tighten more and faster, the more some of these negatives start to effect markets and economic growth over time.”

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