Wall Street is optimistic about stocks rising in 2017 given that President-elect Donald Trump’s policies are designed to boost the economy among other positive indicators. However, the market could be derailed by a number of factors. Here is a look at a few potential roadblocks to even more gains this year.
In 2016, pessimistic analysts got plenty of predictions about the market wrong. Brexit did not cause a prolonged stock slump, Trump’s election never resulted in a global meltdown, and the Italian referendum didn’t have the slightest effect on the markets. Instead, the U.S. stock market has continued to climb undeterred by the changes. Investors are optimistic about the expected tax cuts, lessened regulations and growth of domestic infrastructure under Trump’s presidency. Just a few weeks after Trump’s election, the Dow had gained 2,000 points. Strategists expect even more gains this year.
However, there’s worry that, in the quite uncertain 2017, a few factors could derail the market. The major cause for uncertainty lies in what Trump will do once he takes office. According to David Kostin, a Goldman Sachs analyst, the stock market will be affected by competing views of whether Trump’s economic policies and those of a Republican Congress will instill fear or hope. Here are a few more potential roadblocks to rising stocks in 2017.
A Republican-controlled Congress
One of the major worries cited by many strategists is Trump’s efforts to boost the national economy being delayed or diluted by a Republican-controlled Congress reluctant to increase the budget deficit. Trump’s promise to cut taxes and ease regulations while boosting infrastructure has prompted gains in diverse sectors including banking, construction and health care. Analysts have hinted that these policy changes may easily get watered down by Congress and adversely affect the stock market.
Potential for higher inflation
Trump promised to cut taxes and increase government spending. While these actions promote the growth of the economy, they could also result in a runup of prices and runaway inflation. The Fed, which is the watchdog of inflation, would be forced to react quickly by increasing interest rates. Investors are already preparing for higher inflation rates.
The expected rise in import tariffs
Investors are a worried lot given that Trump has threatened to renegotiate trade deals. On Dec. 22, 2016, retail shares fell by 3.5% after a report about Trump’s intention to increase import tariffs to as high as 10%. Increased tariffs on goods from China and Mexico would increase the prices of imported goods for consumers in the U.S.
The ever-present threat of cyber attacks
Allegations of cyber attacks and hacking by Russia just before the presidential election last year and security breaches at Yahoo have increased fears among investors on the potential for a larger scale attack in the near future. Such an attack could severely harm the economy.
Conclusion
We live in uncertain times, and 2017 is no exception. Many things could go wrong with the economy but as every savvy business owner knows, adopting the safest business practices is the first step to cutting down on unnecessary expenditures. Workplace safety and health should be the primary considerations to avoid unforeseen losses. CertifyMe.Net provides 100% OSHA compliant online training for Forklift operators.
Start a free seven-day trial of Premium Membership to GuruFocus.
