Jeremy Siegel, finance professor at the University of Pennsylvania's Wharton School, warns that several factors, including the president himself, threaten to kill the stock market's record-setting rally.
"I think the biggest risk to the rally is that we're going to see a protectionist movement … throwing tariffs on, and then retaliation [from abroad]," Siegel recently told CNBC.
Siegel said a potential trade war could drag the Dow industrials down to 18,000, implying a more than 10 percent drop from current levels. "It has to be recognized as a risk to the market," said Siegel, who still remains bullish on the market's future.
President Donald Trump has made clear that he is pursuing an "America first" approach on the economy, vowing to restore jobs that moved abroad and reworking trade agreements, CNBC.com reported. Investors ranked protectionism as the biggest risk to the bull market, according to Bank of America Merrill Lynch's February Fund Manager Survey.
Siegel also cautioned that we don't know how Trump will react on the global stage amid a true crisis. "If [Russian President Vladimir Putin] makes some moves toward the Baltic states or more aggressively in Ukraine, … if China makes some moves, you know, Trump is more unpredictable. And that unpredictability is a negative for the market," Siegel said.
The major U.S. stock indexes could see further upside if some of Trump's promised policies — like corporate tax cuts and fewer regulations in the financial industry — are implemented, Siegel said.
For the year, the Dow is up 849.26 points, or 4.3 percent. The S&P 500 is up 110.42 points, or 4.9 percent, as of Wednesday's close, the Associated Press reported.
"That in and of itself, I think, is worth, certainly, as I said, 22,000 on the Dow, or maybe even higher. Whether it's going to get there or not is that lingering fear on those negatives that accompany the Trump presidency," he said.
For his part, Trump tweeted Thursday morning that the latest stock market highs show a "great level of confidence and optimism," putting his praise in the context of his upcoming tax plan.
Trump has promised to lower tax rates "very, very substantially for virtually everybody in every category. Including personal and business."
However, not everyone is as optimistic as the current commander-in-chief.
"While the economy is in good shape, the administration is not," Newsmax Finance Insider Joel Naroff explains.
"The chaos is raising questions about the ability to push through significant tax cuts and spending increases," Naroff wrote in a recent blog.
"Unless revenue increases are found, the proposals will cause the deficit to soar. The political pressure a $1 trillion deficit forecast would put on the Republicans would be hard enough to deal with without political problems," Naroff wrote. "With those issues, action could be either pushed into later this year or only showpieces would be passed. That would not be good news to all those investors who believe that happy days are here again," Naroff wrote.
(Newsmax wires services the Associated Press, Bloomberg and Reuters contributed to this report).
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