Euphoric markets are ignoring growing political risks

THE PAST year has brought war to the Middle East, escalation of the trade conflict between the West and China and, on July 13th, an attempt to kill the frontrunner in America’s presidential race. But if you look at financial markets, you’d think nothing was amiss. No amount of blood or political rancour, it seems, can distract Wall Street from the good economic news: that fears of recessions have so far proved wrong, and that inflation has nonetheless tumbled. As a result markets are at, or close to, all-time highs in America, the euro zone and Japan, and many emerging-economy stocks are booming, too. Optimism is rife. Compared with companies’ profits, America’s stocks have only ever been this pricey during two previous booms.

It may be that the attempt on Donald Trump’s life was a random act without profound implications. America has a long history of attacks on politicians; neither the two attempts on Gerald Ford’s life in 1975 nor the one on Ronald Reagan’s in 1981 brought on crises. Yet the fact that it is easy to imagine partisan loathing inspiring an assassination attempt is a reminder of America’s political dysfunction, which is spilling over into global disorder. And if Mr Trump and his young running-mate, J.D. Vance, ride on a wave of solidarity to the White House, there will be another round of disruption. As his speech at the Republican convention showed, Mr Vance amplifies, more eloquently, Mr Trump’s isolationist instincts. Europe could face at once the loss of its NATO security umbrella and the economic pain of more American protectionism.