By Sue Chang, MarketWatch
Stock market braces for sea change as Donald Trump takes
charge
Much about President Donald Trump's policies are yet shrouded in
mystery but there is one thing that Wall Street appears to be
certain of -- nothing will be the same. And as a fog of uncertainty
continues 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 22, 2017 14:38 ET (19:38 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.