There's a big distraction that could trip up investors as the stock indexes hit record highs and the Dow, in particular, flirts with 20,000: President-elect Donald Trump. Euphoria over what may lie ahead for the U.S. economy has been the big market mover — not market fundamentals, experts concur. Wednesday's drop in the Dow Jones Industrial Average proves the point. After the Fed announced it is steadily raising rates through next year, stocks swung wildly and the Dow Jones Industrial Average closed down about 120 points, finishing at 19,792. Trump administration pledges could take years to pay off in economic terms, posing problems for what Wharton School finance professor Jeremy Siegel recently described on CNBC as a "98 percent Trump" stock market rally.

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Wells Fargo Investment Institute's senior global equity strategist Scott Wren, who has been studying stock market reaction since Trump won the presidency, is among equity experts who think investors should not count on Trump's policies before they're hatched. Hopes for less regulation, more spending and deep tax cuts are fueling the stock market rally. But Wren urges investors to "focus on the economic and earnings outlook over the next six to 12 months, not on what 'might' happen over the next two to four years."

"President-elect Donald Trump has the opportunity to make some constructive changes, but at this stage it is merely talk," said Mitch Zacks, president of Zacks Investment Management, which manages $5 billion. "Governing is much, much more difficult than campaigning."

Corporate earnings could be undercut by higher rates, and that's more important than Trump with the Federal Reserve poised to raise interest rates on Wednesday.

What rate hikes really do to the S&P 500

Rising interest rates also concern Robert Johnson, president and CEO of The American College of Financial Services and co-author of "Invest With the Fed" with Gerald R. Jensen of Creighton University and Luis Garcia-Feijoo of Florida Atlantic University. They found stocks often disappoint when rates are rising. "From 1966 through 2013, the returned 15.2 percent when rates were falling and only 5.9 percent when rates were rising," Johnson says. "Bottom line, stock investors should expect lower returns as rates rise over the next few months and years." That doesn't mean stocks will fall if rates keep going up, just that they won't rise as much, he says. Siegel warned on Monday that the next 1,000 Dow points are going to be harder to come by than the last 1,000. "The bullish trends are still in place, definitely." But he added, "We are at a rich multiple on earnings. So we got to have those earnings come in, I think, for it to move for the next 1,000." He is not the only prominent business figure saying stocks are expensive. On Tuesday, so did Bill Gates. And the just-released CNBC Fed Survey found that the market is way too optimistic and "running ahead of reality" when it comes to Trump policy. Wren sees too much uncertainty between the real economy and Trump promises to keep betting on policy that doesn't even exist yet. The U.S. economy should grow in 2017, according to Wren, causing inflation to rise to normal levels after years below normal. Most experts say 2 percent annual inflation is desirable. But Trump's vow to be tough on trading partners China and Mexico could dampen the economy if the result is trade restriction and retaliation from those countries, the Wells Fargo strategist argues.

Miles Lewis, co-manager of American Century Investments Small Cap Value Fund (ASVIX), agrees that the stock rally has been driven by hopes for pro-growth Trump policies. And he cautions that "the market has moved rather quickly, and arguably pulled forward future returns," suggesting recent gains could be offset by less stellar results in the future.

He notes that the price-to-earnings ratio on the Russell 2000 Value Index grew from 16.7 to 18.9 in the three weeks after the election, bringing the ratio to the high end of its level over the past 20 years. The more investors pay for every dollar of earnings, the riskier the bet becomes. Higher interest rates would make it harder for the P/E ratio to continue rising, he adds. High rates increase corporate borrowing costs, and demand for stocks weakens as they get more competition from bonds offering generous yields.

Lewis also sees risks ahead from uncertainty over trade policy and whether tax cuts and fiscal spending will really come about.

Fixed-income experts espouse similar caution. Brian Rehling, the Wells Fargo Investment Institute's co-head of global fixed income strategy, said, "Given the uncertainty around exactly what fiscal spending and tax-cut policies will be enacted into law, the full Trump premium is difficult to quantify at this time," he says. Investors should expect the next few quarters to be volatile as markets assess and reassess the policies of the new administration.

Reasons to remain bullish