US Exceptionalism Will Propel Stocks, Dollar in 2025: MLIV Pulse

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(Bloomberg) -- US stocks and the dollar will be the biggest beneficiaries of American economic growth set to be boosted by Donald Trump’s policies, according to the latest Bloomberg Markets Live Pulse survey.

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By year-end, 61% of 553 respondents said the S&P 500 will be higher due to strong US economic and earnings growth. Several cited the incoming Trump administration as a likely catalyst, in a survey conducted after the Federal Reserve’s Dec. 18 policy decision through Dec. 31.

When asked whether Trump’s policies would boost or drag the dollar, or have no major effect, about half said the incoming president will have a net positive effect on the currency, citing the impact of his preference for tariffs. Notably, 27% of survey takers see the same policy as reason to expect a weaker greenback.

The divide highlights the double-edged sword that Trump’s slated policies are expected to have on the US economy and markets. While investors see his stance for lower taxes and looser regulations as a boon to growth, others see his aggressive approach to trade stoking inflation and keeping interest rates elevated — a combination that tends to hurt consumer demand and weigh on US assets.

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“The two views will come into conflict at some point,” said Timothy Graf, head of EMEA macro strategy at State Street Global Markets. “I expect this to be a higher-volatility environment for stocks and typically their correlation becomes more negative when that happens.”

For the S&P 500, 2024 was a banner year — even with a late-December swoon. It notched 57 record closes, propelled by swelling values for companies including Nvidia Corp. and Apple Inc. Meanwhile, the Bloomberg Dollar Spot Index climbed by the most in nearly a decade. Both were bolstered by a US economy that defied expectations for a slowdown.

“Economic growth is holding up remarkably well, though I do wonder whether some of that is wealth from an equity market that is rising at a pace unlikely to be sustained,” said Kit Juckes, head of currency strategy at Societe Generale. “The dollar can stay at these extremely high levels for as long as the US economy is growing strongly and the rest of the world’s savings are being poured into the US markets, but stronger is a big ask.”