“The world is potentially headed into a period where there is a less of a sense of what the order is going to be, and therefore more risk of disorder, chaos, and the associated suffering, and I’m not sure that kind of risk is fully priced in to markets,” Summers told the FII Priority Summit.

Speaking in Miami to Eric Schmidt, the former CEO of Google, Summers said markets have taken political stability in the U.S. for granted and he argued this steadiness has driven huge economic growth in the U.S. that has seen American companies’ valuations surge over the past 25 years. 

The economist instead argued markets have “insufficiently” priced-in risks associated with the rise of “populist, nationalist politics” that could see a breakdown in the rule of law in the U.S., ahead of the upcoming 2024 elections, and increased trade protectionism abroad. 

“One of the clearest lessons of economic history is that over a period of a decade, populism is almost always bad for economic performance, whether it’s right-wing populism or left-wing populism,” Summers said. 

He explained that increased restrictions on the flow of goods and people internationally, paired with the collapse of international collective security arrangements, could undermine global economic growth in the future.   

In addition, commenting on U.S. monetary policy, Summers repeated his view that the next move in interest rates by the Federal Reserve could actually be up, citing the strength in the economy and “increasing evidence that inflation may be less down for the count than many people supposed.” He said four rate cuts — what the market is expecting — could well happen “but is a probably above the center of mass of what I think.”