Investors eye limits to Trump-win market rally
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The full reality of what a second Trump term means for businesses and the economy is still settling in.
Why it matters: The kind of ebullience that investors have expressed in the markets post-election this week may not last.
Catch up quick: Expectations for a friendlier regulatory environment have helped drive stocks to their best week of the year Friday.
- But the fear of tariffs has already prompted companies to move their chess pieces. Investors are weighing risks to supply chains and labor markets if President-elect Donald Trump acts on his mass deportation threats.
- And the bond market has flashed warning signs around long-term inflation and government borrowing — sending 10-year Treasury yields to their highest level since early July.
What they're saying: "The re-election of Donald Trump introduces variables that could lead to short-term market volatility as new policies are implemented and existing ones are expanded or curtailed," Morgan Stanley wealth management policy strategists wrote this week.
The big picture: Investors are pricing in the potential impact of unfunded tax cuts on the federal deficit and the negative consequences of new trade tariffs, which include higher inflation, The Street notes.
- That reality could play a major factor in the way stocks perform — potentially blunting the current rally.
The intrigue: During Trump's first term, optimistic trades around the general direction of the economy, corporate tax cuts and a trade war with China did not last, Lori Calvasina, global head of equity strategy at RBC Capital Markets, told CNBC this afternoon.
What we're watching: Goldman Sachs made no changes to its 12-month price target for the S&P 500 in its updated equity market outlook Wednesday, per The Street.
