US stocks and the dollar are expected to benefit the most, as Donald Trump’s policies are expected to boost economic growth.
According to the report, strong economic and earnings growth in the United States has inspired optimism for stocks. About 61% of the 553 respondents said the S&P 500 would rise by the end of the year.
However, many pointed to the Trump administration’s political outlook as a key factor. The survey was conducted after the Fed’s Dec. 18 policy decision and through the end of the year.
Opinions were divided on how Trump’s policies affected the dollar. Half of respondents thought Trump’s stance on tariffs would have a positive effect on the currency, while only 27% predicted the policy would weaken it.
Trump’s policies represent a double-edged sword in the face of America’s conflicting economic expectations.
Lower taxes and easing regulations are seen as drivers of economic growth, but Trump’s trade measures could instead fuel inflation and keep interest rates high. This mix could also dampen consumer appetites and confuse U.S. markets.
Timothy Graf, head of EMEA macro strategy at State Street Global Markets, says: “I expect this to be a higher volatility environment for stocks. “The two views will clash at some point, and he expects that stock market correlations could become negative.
Gains were made in the S&P 500 despite the difficulties, with 57 record closes, thanks to the year’s boosters, Nvidia and Apple.
Unexpected economic resilience helped the Bloomberg Dollar Spot Index jump as much as 1.8%, its highest level in a decade.
U.S. growth is booming, but stock market gains may not be sustainable, according to Société Générale’s Kit Juckes. Even if the dollar is strong, he warned, it will only stay that way if the U.S. economy continues on its current trajectory and global savings continue to flow into U.S. markets.
Low-income households are struggling and higher-income groups are spending more money
American consumers play a key role, but cracks are starting to appear. This gap could widen further as tariffs increase costs and increase pressure on demand.
State Street strategist Noel Dixon highlighted the risk to households. “The bottom 40% of consumers in the United States are still under significant pressure,” Dixon said. He added that higher prices due to tariffs or inflation could seriously affect demand later in 2025.
As many as 57% of survey participants expressed concerns about inflation and believed Treasury yields would rise in early 2025. Following the Federal Reserve’s signal of fewer rate cuts, the 10-year Treasury yields rose to a seven-month high as traders prepared for a tightening of monetary policy. .
Graf warned that any Fed decision to pause rate cuts or even consider hikes would present risks for high-value stocks, although that is unlikely. A Fed move to higher rates and a block on monetary support would strain expensive stocks and be a tipping point, he said.
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