'Trump 2nd Term' Officially Begins... Will the US Stock Market Rally Continue?

Concerns Over Inflation and High Interest Rates Arise
Investor Sentiment Cooling... "This Year Is Different from Last Year"

As Donald Trump was inaugurated as the President of the United States on the 20th (local time), attention is focused on whether the U.S. stock market will continue its upward trend.

Reuters Yonhap News

Recently, the U.S. stock market rebounded ahead of President Trump's inauguration, but investors' concerns are actually growing. This is due to worries that policies expected from the Trump administration, such as universal tariffs and the forced deportation of illegal immigrant workers, will cause inflation to rise and negatively impact the stock market.

The Wall Street Journal (WSJ) reported the previous day that after U.S. consumer price index (CPI) data from last month showed some easing of inflationary pressures, major indices on the New York Stock Exchange turned upward, but analysts believe this upward trend may not last long.

Callie Cox, Chief Strategist at Litoltz Wealth Management, said, "Concerns about rising prices are deeply ingrained in investors' minds, reminding them of 2022," adding, "The wounds caused by inflation back then are still fresh."

In 2022, as prices rose sharply, the U.S. Federal Reserve (Fed) aggressively raised interest rates. As a result, both the stock and bond markets declined together, and it was only the following year that the market turned bullish due to the artificial intelligence (AI) rally.

The market is concerned that Trump's policies will lead to higher interest rates, along with forecasts that the government fiscal deficit may expand. If the deficit grows, the government will need to issue additional government bonds, which could cause interest rates to rise further.

Individual investors' sentiment is also cooling. According to a recent survey by the American Association of Individual Investors, expectations that stock prices will rise over the next six months have fallen to their lowest level since November 2023.

Kevin Gordon, Senior Investment Strategist at Charles Schwab, explained, "Market volatility is expected to increase significantly due to policies coming from the Trump administration. This will be the difference between this year's market and last year's."

Some predict that even if interest rates rise, the stock market will remain healthy. Shana Sissel, CEO of Vanlion Capital Management, pointed out, "There have been many times in the past when high interest rates were not bad for the stock market," adding, "If the economy functions well even in a high interest rate environment, there is no reason to think the stock market will perform poorly."

This content was produced with the assistance of AI translation services.