By Lewis (JO:) Krauskopf
NEW YORK (Reuters) – A U.S. stock rally fueled by Donald Trump’s election victory is stumbling, as investors contend with everything from renewed inflation worries to uncertainty over the impact of the president-elect’s policies.
The fell 2% in the past week, erasing more than half its gains from a post-election surge fueled in part by optimism over the pro-growth policies that are a key part of Trump’s economic platform.
Though the index remains near record highs and is up 23% this year, some of that enthusiasm has been tempered in recent days.
Bets that some of Trump’s policies could spur a rebound in inflation and cloud the picture for further interest rate cuts helped push the benchmark U.S. 10-year yield to its highest level in more than five months on Friday, a potentially unwelcome development for stocks.
Worries over Trump’s cabinet selections and plans for cutting bureaucratic excess have bruised the shares of pharmaceutical companies and government contractors. Meanwhile, Wall Street has little clarity on when, and to what extent, the president-elect will implement his agenda.
While the market had rushed to price in the positive outcomes from Trump’s economic policies, “I’m skeptical that it’s going to be that easy,” said Paul Nolte, senior wealth adviser and market strategist at Murphy & Sylvest Wealth Management.
A Trump spokesperson did not immediately respond to a request for comment.
Trump has previously said that his trade policies – which call for pricey tariffs on goods not only from rivals such as China but allies such as the European Union – would revitalize American manufacturing and yield enough revenue to ease concerns about ballooning the deficit or increasing inflation.
EYES ON YIELDS
Rising yields are one of the market’s chief concerns, because they offer investment competition for equities while raising the cost of capital for companies and consumers.
The benchmark 10-year yield – which typically moves with interest rate expectations – has surged about 90 basis points since mid-September as investors curtailed bets on how deeply the Federal Reserve will cut borrowing costs in the face of robust growth that could stoke an inflationary rebound.
Until recently, stocks may have been able to shrug off the rise in yields because it had been driven by stronger-than-expected economic data. But many of Trump’s policies – from tax cuts to tariffs – are seen as inflationary, and…
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