US stocks have looked sluggish at times as rates have risen over the past several weeks and The debate over whether or not the Federal Reserve will cut interest rates Sent the S&P 500 to 2025 (^GSPC) is at its lowest level since the election.
But a better-than-expected inflation reading on Wednesday helped U.S. markets rise, and Bank of America investment strategist Michael Hartnett believes further declines in the S&P 500 will be “protected” by President-elect Donald Trump in the coming months. .
During his first term as president, Trump viewed the stock market this way A barometer for the success of his own administration. Many investors expect Trump to remain sensitive to the pullback in U.S. stocks during his upcoming tenure.
And while the tariffs are a concern for investors and corporations, Trump’s other policies could be positive for the stock market.
Deregulation has been done Seen as a boon for banks And a challenging few years later could spur more bargaining. Another one Crypto-friendly administration has sent the market pocket higher, and lower corporate tax rates could help corporate profits across industries. Trump’s ““America First” mantra also Increased optimism among small businesses And can be seen as a tailwind even for small-cap companies.
Hartnett cautioned, however, that other factors such as high market valuations and concentration seen in the index – With only 10 stocks making up about 40% of the index – could also potentially put a cap on the upside for the S&P 500.
And one question remains, will rallies in certain “Trump trades” such as small caps, energy stocks, and financials begin after the election? Only to withdraw most of their benefits Leading in the opening.
Hartnett added that if Trump 2.0 and the rate cut small-cap Russell 2000 (^RUT) index is likely to reduce its overweight position in asset allocation stocks, steadily at its 2021 high.
Broadly speaking, strategists agree with Trump’s policies There may still be a tailwind for the US equity market But don’t believe that those benefits are going to come in a straight line.
“January’s volatility ahead of Trump’s 1/20 inauguration reinforces the key outlook for another volatile year,” said Julian Emanuel, who leads the equities, derivatives and quantitative strategy team at Evercore ISI. wrote in a note to clients on Thursday night.
Emanuel, who sees the S&P 500 finishing 2025 at 6,800, or about 13% higher than current levels, still argues that the Trump administration is between “risk on” and “risk off” sentiment among investors. will bring a continuous swing.
