Adam Shell

USA TODAY

Financial markets in 2017 will likely be all about “Trumponomics.”

The moment Donald Trump was declared the winner of the presidential election on Nov. 8, Wall Street’s script for where financial markets were headed in the new year underwent a major rewrite. Suddenly stale 2017 market outlooks were torn up and new, more bullish, forecasts drawn up.

Indeed, the arrival of business-friendly Trump at the White House, coupled with a Republican sweep of Congress, added up to a bullish change agent that the four Wall Street pros that took part in USA TODAY’s 21st annual Investment Roundtable weren’t necessarily expecting – but which they now view as a mostly positive development for a U.S. stock market that has been in bull-market mode for nearly eight years.

“Trump’s election is a game changer,” said Roundtable panelist David Kostin, chief U.S. equity strategist at Goldman Sachs.

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The well-respected big-picture strategist, who hails from the same Wall Street firm where several of Trump's cabinet picks and advisors have worked, expects the so-called “Trump Rally” to extend into the new year. His call is for the broad Standard & Poor’s 500 stock index, which closed Wednesday at 2,253, to climb as high as 2,400, or nearly 6.5% higher by the end of March. But he sees the market giving back some of its gains and finishing 2017 at 2,300 (or 2% higher than current levels) as the reality of what Trump can get passed through Congress “tempers” the post-election market euphoria.

Rupal Bhansali, chief investment officer of international and global equities at Ariel Investments, summed up the 180-degree political and economic shift this way: “What we are essentially witnessing,” the Roundtable panelist and five-star fund manager said, “is a regime change. We had Reaganomics in the 1980s. We have Abenomics in Japan. Now we have Trumponomics.”

Trump’s platform is seen propelling the domestic economy to a faster growth rate and providing a boost to corporate earnings growth, the fuel that drives the stock market. The general outline of Trump’s plan, namely to slash the corporate tax rate to as low as 15% from 35%, do away with regulations that U.S. businesses’ complain makes it difficult for them to grow, and spend $1 trillion to rebuild the nation’s infrastructure over 10 years, is viewed as a template for growth.

“I am more optimistic,” acknowledges Roundtable panelist Jeff Rottinghaus, manager of the five-star T. Rowe Price U.S. Large-Cap Core Fund, adding that Trump’s policy platform is “very positive” for the financial picture of America.

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Gavin Baker, manager of the five-star Fidelity OTC Fund, who says his investment focus is more about identifying the next great innovation in tech and profiting from it, and less about forecasting market outcomes, says the financial math does add up for many stocks and sectors that could benefit from Trump’s call for lower taxes and fewer regulations.

“It’s reasonably clear that with single-party control in Washington, D.C., that we are going to get tax reform and regulatory reform,” Baker said. “So if you are a domestically focused U.S. company with a tax rate that goes from, say, 40%, down to 25% (under Trump), that means your after-tax earnings go from 60% to 75%, which is a 25% increase in your company’s earnings per share. That is real fundamental change. Similarly, if there is regulatory change that results in banks having to hold less capital, that (improves) their return profile.”

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Still, there are potential headwinds.

For one, Wall Street has yet to get many specifics on what kind of tax relief Trump will be able to push through for U.S. companies. Nor do investors know what regulations will be eliminated, or how much Congress will approve in terms of a dollars to be spent on infrastructure, or what lawmakers will decide on how much to tax U.S. companies for profits sitting overseas and how that might motivate CEOs to repatriate some of that cash and bring it back to America.

Trump could also upset markets by starting trade wars with trading partners like China and Mexico, as well as slapping tarrifs on incoming goods to the U.S.

There’s a strong chance Trump won’t get everything he wants, nor will Wall Street.

Disappointment could cause stock prices, which have been driven higher on expectations of a major policy shift, to pull back.

“The market,” says Rottinghaus of T. Rowe Price, “has priced in a lot of hope. In politics, there’s kind of a rule: you never get everything you want. So to have a strong stock market in 2017, we have to get Trump’s (pro-growth) policies enacted.”

Then there’s the Federal Reserve, which on Wednesday hiked short-term interest rates a quarter of a percentage point for the first time in 2016 The Fed's target rate is now 0.75%. The Fed is expected to increase interest rates another three-quarters of a percentage point in 2017, which would boost the rate to 1.5%.

“The Fed is an enormous driver,” says Fidelity’s Baker.

But if the nation's central bank ends up hiking more aggressively that could hurt the bullish vibe on Wall Street.

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Says Rottinghaus of T. Rowe Price: “If there is a pattern of consistently rising rates from the Fed, and if we started to see signs of inflation picking up, those things are typically not good for stocks over the long term."

Still, at least one Roundtable panelist is betting on the end of political gridlock under one-party Republican rule, setting the stage for a large chunk of Trump’s market-friendly policies getting passed.

“A lack of gridlock means a few things can move forward,” says Kostin of Goldman Sachs. “It’s like being in a traffic jam around Trump Tower in New York. When the barriers come down the cars can move.”

*Top strategists and money managers from Goldman Sachs, T. Rowe Price, Fidelity and Ariel Investments offered their predictions for the market when they sat down with USA TODAY’s Adam Shell and Matt Krantz for our 21st annual Investment Roundtable. Check out Roundtable highlights, including stock-specific tips, on USA TODAY Money on Twitter and Facebook.