How to Play the Stock Market Under President Trump

It’s a rare event when one of Wall Street's most accurate forecasters says the U.S. stock market is poised to go higher.

Stock Market Donald Trump

The massive stock market rally following Donald Trump’s stunning win and the Republican sweep of the Congress that briefly carried The Dow Jones to its biggest jump since Dec. 2011 and to a record high of 18,855, still has more to go on the upside despite Friday’s retracement.

“We think [the markets] can go a bit higher from here,” JPMorgan’s (NYSE:JPM) Marko Kolanovic told CNBC’s “Fast Money” this week.

Kolanovic, seen as one of Wall Street’s most accurate forecasters, predicts that Trump’s policies, which would include more fiscal spending and a cut in corporate and personal income taxes, which by the way is bullish for stocks as it will boost growth prospects, would be great for equities—at least in the short-term. “This would be reflationary in nature,” he said.

JPMorgan, which has a 2,100 year-end price target for the S&P 500, implying the index will decline by nearly 3% by the end of the year, says the S&P, which is currently trading at 2,164.45 points, or only within 2% of a record price, could surge to 2,300, or 6.3% from current levels in early fiscal 2017.

However, Kolanovic acknowledged the risks that some of Trump’s policies like his protectionist agenda when it comes to trade by threatening to slap a 45% tariff on Chinese imports, declare China a currency manipulator on his first day in office, or tax imports from Mexico, pose to the markets.

If Trump were to pursue these policies, they might spark a global trade war, “which could easily trigger a global recession,” Citigroup’s Willem Buiter wrote in a note to clients.

“There are still uncertainties,” noted JPMorgan’s Kolanovic.

“We do think that should keep realized volatility over the market a bit elevated. There are going to be things the market is going to be surprised” about,” he said. “I wouldn’t necessarily shun all safe-haven assets.”

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