By Sue Chang, MarketWatch

Strategist says all investment decisions must be re-evaluated

Much about President Donald Trump's policies are yet shrouded in mystery but there is one thing that Wall Street appears to be certain about -- nothing will be the same. And as a fog of uncertainty continue to envelop the market, strategists are urging investors to prepare for the unexpected.

"For better or worse, President Trump has become a reality," said Brian Belski, chief investment strategist at BMO Capital Markets, in a note. "We believe there are no perfect conclusions for investors, thereby setting the stage for surprises in both directions."

See:President Donald Trump is set to unleash a cascade of stock-market anxiety (http://www.marketwatch.com/story/trump-inauguration-set-to-unleash-cascade-of-stock-market-anxiety-2017-01-19)

Some were more dramatic, prophesying the end of the U.S. as we know it.

Say goodbye to the old U.S., said Mark Grant, chief strategist at Hilltop Securities. In its place will be a country that is run as a business with businessmen in charge. As a result, he said, all investment decisions must be re-evaluated with the mantra of "America First" in mind.

Read:Market bulls sit on hands as Trump promises 'only America first' (http://www.marketwatch.com/story/market-bulls-sit-on-hands-as-trump-promises-only-america-first-2017-01-20)

The Trump rally that took major indexes to unprecedented heights since November has stalled in recent days as investors await action from the man who promised to "Make America Great Again."

"Investors are likely getting a bit cautious and picky overall, looking for better entry points for 2017 positions," said Richard Hastings, macro strategist at Seaport Global Securities LLC.

The Dow Jones Industrial Average rose 94.85 points, or 0.5%, to 19,827.25, while the S&P 500 climbed 7.62 points, or 0.3%, to close at 2,271.31. The Nasdaq Composite gained 15.25 points, or 0.3%, to 5,555.33. All three indexes finished lower for the week (http://www.marketwatch.com/story/us-stock-futures-in-holding-pattern-as-traders-brace-for-trumps-inaugural-address-2017-01-20).

"The last few weeks have perhaps given us a prologue for what to expect, but now the conversation changes from 'What will he do?' to 'What is he doing?'," wrote Andrew Adams, an analyst at Raymond James, in a note to clients.

Inflows into equities have dwindled to $1.7 billion this week from $8.1 billion in the previous week, according to data from Bank of America Merrill Lynch.

"We are now off on a new adventure. We will soon see what he is actually going to do. Where stocks go now is totally dependent on what Mr. Trump begins to do," said Grant.

There are two spectacularly different scenarios for stocks (http://www.marketwatch.com/story/investing-legend-jim-rogers-says-dump-stocks-if-trump-launches-trade-war-2017-01-20) under the new president, depending on which Trump shows up at the Oval Office, according to legendary investor Jim Rogers, chairman of Rogers Holdings.

"He very much wants a trade war. And if that happens, sell everything," Rogers told MarketWatch, referring to Trump's antitrade rhetoric.

However, if Trump commits to introducing positive changes such as cutting taxes and boosting infrastructure spending, then it will be "happy days" again for investors, he said.

See:Investing legend Jim Rogers says dump stocks if Trump launches trade war (http://www.marketwatch.com/story/investing-legend-jim-rogers-says-dump-stocks-if-trump-launches-trade-war-2017-01-20)

U.S. corporations, for the most part, have welcomed the president's pledge to lower corporate taxes and remove regulatory barriers. Some of that optimism have already surfaced during this earnings season as data from FactSet show.

"In terms of government policies in conjunction with the new administration, tax policy was cited or discussed by the highest number of S&P 500 companies at 11. Six of these 11 companies stated that if taxes were lowered, it would benefit their clients or themselves," said John Butters, senior earnings analyst at FactSet, in a note.

Meanwhile, even as investors remain laser-focused on Trump, corporate earnings may steal some of his thunder.

"We expect next week's stock market price action to mostly reflect earnings fundamentals, and grind very slightly lower by week's end," said Seaport's Hastings. "We are primarily concerned that the season will result in an accumulation of mentions about foreign exchange and U.S. dollar strength as headwinds in 2017 guidance."

The ICE dollar index , a measure of the U.S. dollar's performance against a basket of six rival currencies, has risen 3% since November, largely on expectations of pro-growth policies from Trump.

Thirty-four S&P 500 components are slated to report earnings this week. Of the 54 companies that have released quarterly results so far, 74% are beating earnings estimates by a median of 5%, according to Fundstrat.

 

(END) Dow Jones Newswires

January 21, 2017 10:43 ET (15:43 GMT)

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