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Trump could soften his economic agenda to appease investors, Wharton’s Jeremy Siegel said.
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That’s because Trump is “the most pro-stock market president” in history, Siegel told CNBC.
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Investors in the bond market have bristled at some of Trump’s proposals, Siegel added.
Donald Trump might hesitate to do some of his housecleaning economic agenda to avoid losing the approval of stock and bond investors, Wharton professor Jeremy Siegel said Monday. .
In an interview with CNBCSiegel said he believed Trump would take a strong pro-market stance during his next term, even at the expense of some of his proposed economic policies. The top economist pointed to Trump’s eagerness to use the stock market as a benchmark for past success as a reason why he may not want to disrupt the roaring bull market.
“President Trump is the most pro-stock market president we have had in our history,” Siegel added. “It seems very unlikely to me that he is going to implement policies that are bad for the stock market.”
A response to some of Trump’s proposed policies, which economists say will contribute to the problems federal deficit And fuel higher inflationwas already visible on the bond market last week. After the election, 10-year US Treasury yields rose above 4.4%, the highest level since July.
While yields have since fallen and stabilized, Siegel said this is a sign that bond investors may be willing to protest policies that further pile up government debt or fuel inflation.
It could also be a sign that investors are concerned about the potential for higher inflationand expect higher interest rates from the Federal Reserve.
“I thought what happened on Wednesday after he won when the returns were going up was a shot across the bow and said, ‘Hey, you know what, just watch what you do. We’re here, and all tax cuts You promised, we are very skeptical,” Siegel said. “Both the bond market and the stock market will be a major drag on many of Trump’s programs.”
With a Republican-led Congress, Trump’s proposal to extend his 2017 tax cut package appears to be a “slam dunk,” Siegel noted, although he said he expected challenges for Trump’s other countries. proposed tax cuts. If Trump were to implement all his proposed cuts, interest rates could eventually rise above 5%, Siegel predicted.
“So I think the trend of higher long-term rates will continue,” he added.
Sigel added that the former president is unlikely to do so wrest control from the Federal Reserve. Although Trump was reportedly making plans exert more influence Given the central bank’s policy decisions, this measure would likely prove unpopular with the markets.