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Investors have greeted Donald Trump’s surprise win with the biggest stock market rally for any new US president. Morgan Stanley is cautioning, however, that his coming inauguration may mark an end to these post-election good times.

The S&P 500 Index jumped 1% on 3 January, pushing its gain since 8 November toward 6%, on speculation that Trump and policies pushed by the Republican-controlled Congress will boost growth. But near-record levels for US stocks already reflect that sentiment, and the start of the Trump administration on 20 January presents as good a time as any to scale back on equity holdings, the bank said.

“After all, what incrementally positive and exciting outcomes could be produced in the first few weeks after that?" the team, led by chief equity strategist Adam Parker, wrote. “We can’t help but think that the Republican sweep has created a more uncertain and volatile outlook for the economy and corporate earnings growth."

While the prospect of less regulation, lower corporate taxes, and a potential tax holiday for overseas earnings has investors speculating that growth is set to accelerate, an accompanying surge in the dollar could crimp exports and force the US Federal Reserve to raise interest rates faster than expected, Morgan Stanley suggested. The bank says the S&P 500 will finish the year at 2,300—just 2% above its current level—as corporate profit growth remains vulnerable to the potential for slower expansion in China, fallout from European elections, and the rising dollar. The target is below the average estimate of 2,356 among 15 analysts surveyed by Bloomberg as of 19 December.

Other banks are also advising caution. Jefferies Group LLC, which expects the S&P 500 to rise to 2,325 this year, said this week that the bullish call on transportation stocks it made on 8 November is no longer valid.

This year’s theme is shaping up to be ‘uncertainty’ as Wall Street analysts are having a particularly hard time making forecasts for the upcoming year.

“We can’t recall a time when a change in leadership in Washington had the potential for such large and diverging effects on the US economy," Bank of America Corp. analysts said in a recent note.

Bloomberg

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