Wharton finance professor Jeremy Siegel is optimistic that the nation and stock market are on a straight and narrow path to growth and will flourish under President Donald Trump, despite the rocky start when stock futures plunged 800 points election night amid initial investor shock and awe.
“The risk markets hate uncertainty,” he explained in a Wharton podcast.
“Trump was identified as [bringing] more uncertainty. And therefore the initial gut reaction is exactly what you saw,” he said. But he explained that Wall Street also has learned lessons from Brexit — in which the markets recovered after the initial shock of the vote to exit. It taught investors not to overreact to the surprise election news, he said.
He said once investors had time to digest the concept of a President Trump, the market tide literally changed in a matter of hours.
“When you look at it from a broader perspective, the Republicans who swept Congress as well as now the presidency are far more capital friendly than the Democrats by a huge margin. So in many ways people are saying, ‘hey, you know, if we can get beyond the uncertainty, if he can pin down some procedures, if he can appoint some good people, if we can have more confidence there, we have a much better man in the White House than we would with [Democratic presidential candidate] Hillary Clinton,’” he said,
“Now the only thing that appears, I’m going to say permanent, in the market, is we’ll definitely have higher long term interest rates. That is, in my opinion, due to the fact that … Trump has talked about huge infrastructure [spending]. He’s talked about huge tax cuts. This means big deficits. I don’t know if we can keep these long rates down. So this is putting some pressure here on the long side. And that has been creeping up,” he said.
Meanwhile, he said investors can return to focusing on previous speculation, such as when the central bank will hike rates.
“If the financial markets remain calm over the next five weeks, the odds are definitely still on for a rate hike in December,” he said.
Siegel isn't alone in his enthusiasm for Trump's potential
Veteran financial guru Larry Kudlow, who served as the Trump campaign's senior economic adviser, tells Newsmax TV that Trump will live up to his campaign vows to restore prosperity to all Americans and the nation we all love.
"Donald Trump has a very strong economic growth message which is going to be great for the economy and for profits and for businesses large and small," Kudlow said Wednesday to Steve Malzberg on "America Talks Live."
Kudlow, a Newsmax Finance Insider and CNBC senior contributor, said the billionaire real-estate tycoon was successful because he understands the dissatisfaction of "ordinary middle-class folk."
"With Mr. Trump you're going to have across the board tax cuts, you're going to end Obamacare, which is a prosperity killer and a healthcare killer, you're going to take the handcuffs off of energy, you're going to wall back all these regulations and you're going to stop the government from taking over the economy. That's a powerful message," Kudlow said.
Trump "understood that they were angry and that the establishment in Washington and elsewhere was not delivering. He understood that they wanted change and he understood that they wanted to drain the swamp, get rid of the corruption, stop the corporate cronyism," Kudlow said.
"He understood that instinctively and he knew that people were not willing to give up the American dream … I think it was effective and I think he hit it exactly right. He just understood the American people in a way that no other political figure has understood it."
Trump's proposed policies such as tax cuts, higher fiscal spending and simplifying regulation are likely to benefit sectors such as banks and industrials.
Trump has sided with leading conservatives in calling for the repeal of the 2010 Dodd-Frank Financial Reform Act largely opposed by banks.
"The Trump campaign did say it would repeal Dodd-Frank. Rates are higher and the yield curve is steeper. Those are all good things for the banks," Warren West, principal at Greentree Brokerage Services in Philadelphia, told Reuters.
But the possibility of Trump slapping punitive tariffs on exports from some countries such as China has unnerved some investors.
"The markets are adjusting to a new reality and are giving Trump the benefit of doubt," said Adam Sarhan, chief executive officer of Sarhan Capital. "He does have some problems with immigration and with social issues, but his economic policies, at least in the short-term, are perceived to be stimulative and net good for the economy and that's why stocks are rallying."
(Newsmax wire services contributed to this report).
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