In the first of a special three-part Big Question, fund managers give their views on whether President Trump can deliver on his campaign promises, and what this will mean for markets.
Scott Jamieson, head of multi-asset investing at Kames Capital
Pace of delivery
Successive surveys of corporate and consumer sentiment have shown increased confidence since Donald Trump's election. Some 325,000 small business owners and managers in the US National Federation of Independent Businesses combined to report a marked improvement in their assessment of future prospects.
Clearly, they expect to benefit from a swift delivery on Trump's promise of sharply reducing 'red tape', his avowed tax cuts, his 'build it here' Twitter campaign, and a rise in infrastructure spending. It remains to be seen whether companies follow through and increase capital spending but a rise in 'animal spirits' is a helpful beginning.
Given what we have seen from President Trump since his election victory, it would be foolish not to expect some progress in each of these areas, but it is extremely unlikely he will be able to deliver this at the pace needed to sustain the current buoyant optimism.
The bar marking what President Trump needs to deliver gets higher every day.
Seema Shah, global investment strategist at Principal Global Investors
The tremendous rally since 9 November has gone against most expectations, with many pundits initially fearing an imminent recession. In fact, we believe the US business cycle was not winding down but rather the global economy was already in a mild, but synchronised, upturn.
President Trump's victory has simply enabled financial markets to believe in the recovery and focus on reflation, stimulus, and tax reform. From that perspective, the market has not built its house upon the sand. But is it on the rocks?
With so much uncertainty, markets are certainly vulnerable. There is, of course, the risk Trump under-delivers on tax and regulatory reform, while hints of protectionism have already caused corrections several times.
Volatility will be the name of the game this year. Protectionist policies could add to the US-specific reflationary impetus from tax reform - in the short term, at least. They would, however, negatively impact international markets and it is here that we worry markets may have moved too far.
Hector Kilpatrick, chief investment officer at Cornelian Asset Management
President Trump has a complex personality and it is far from certain that he will preside over a full first term. Investors are currently focusing on his pro-growth policies and ignoring the obvious pitfalls. That said, investors' enthusiasm for equities is also a result of emerging evidence of a synchronised upswing in developed market growth.
In the short term, this could result in steeper government bond yield curves and further outperformance of bank stocks as investors reappraise the sector's potential to generate capital.
This could become a virtuous circle whereby banks' propensity to lend rises as capital generation improves, which then results in rising expectations for faster economic growth and yield curves steepening further.
Importantly, this could support existing full-year market earnings forecasts. If so, equities could continue to do well in the near term.
If interest rates continue to rise, market multiples will be impacted and higher financing costs will hinder economic growth. This may become the defining issue of the second half of the year.