Stock investors are shrugging off economists’ gloomy predictions about US president-elect Donald Trump’s economic policies, instead betting that his plans will boost corporate profits and boost the economy. market.

Wall Street’s S&P 500 benchmark up at record highs last year and, although there is a recent pullback, equity strategists have predicted winnings of about 10 percent for the index this year on the back of strong revenue growth.

That bullish tone is in stark contrast to recent warnings from economists about the likely damage from Trump’s protectionist policies, which, they say, could hit economic growth, raising. inflation and limit the Federal Reserve’s ability to cut interest rates.

Some put that sharp division down to different views about the extent of Trump’s implementation of his plans, doubts about the impact of GDP growth on the income of Big Tech groups that are driving the market rally. , and different timescales to measure the effects of the new president’s policies.

“I suspect economists are taking a lot of what Trump has said he’s going to do as likely to play out,” said Evan Brown, portfolio manager and head of multi-asset strategy at UBS Asset Management. “Investors, rightly or wrongly, are betting Trump won’t follow through to nearly the same extent.”

NEW Financial Times polls found more than half of 47 economists surveyed on the US economy predicting “some negative impact” from Trump’s policies, with an additional tenth expecting a “large negative effect” and only one in five predicted a positive effect.

Many have focused on risks from two high-profile Trump policies: trade tariffs and US immigration restrictions.

“If I were to channel an economist and look at this new era as an empty glass, those would be exhibits A and B that I would point to,” said Jurrien Timmer, director of global macro at Fidelity. “But the market is looking at profits.”

Analysts forecast earnings growth of 15 percent for the S&P 500 in 2025, according to data compiled by FactSet, up from about 9 percent last year. Net profit margins are expected to expand to their widest in a decade.

Many fund managers said it was too early to change their profit forecasts, due to uncertainty about what policies Trump will implement or what effect they will have in practice.

Barry Bannister, chief equity strategist at Stifel, said: “Immigration will initially target border control and criminal elements, but with many new immigrants actually leaning Republican . . . we doubt there will be many deportations. “

The tariffs are also likely to be targeted rather than the sweeping ones threatened by Trump, he added, designed to boost US exports and investment in US manufacturing.

The differing views of economists and investors may also stem from either of Trump’s two major campaign promises — to “make America great again” through tariffs and immigration restrictions, and on reduce the federal government – both groups are expected to dominate the next four years, said Jason Draho, head of asset allocation for the Americas at UBS Global Wealth Management.

Overall, Maga “benefits labor” while deregulation “favors capital”, he added. “The more (deregulatory) Trump 2.0 economic policies end up being, the more favorable the investment outlook will be,” he added.

Others also point to the lack of historical correlation between economic growth and stock market returns as reassurance that, even if growth suffers, that doesn’t necessarily trigger a bear market.

Kevin Khang, senior economist at Vanguard, said: “There is a lot that goes into giving you a positive return on the stock market, other than economic growth.”

Trump’s pro-business stance is expected to encourage companies to invest, which could help sectors beyond technology boost their profits as well.

Rick de los Reyes, a portfolio manager at T Rowe Price, said: “You can see some companies that were hesitant to make investment decisions before, are more willing to do it now.”

Earnings for the Magnificent 7 are projected to grow 21 percent this year, up from 33 percent in 2024. That’s ahead of other sectors, but lower this year, along with earnings for the other 493 members of the S&P 500 which is set to grow 13 percent this year, up from 4 percent, according to FactSet.

In the end the economists and investors may be proven right – but in different time periods. Investors tend to think shorter term, with the market always looking at future earnings and the potential for impending tax cuts. Over a longer period of time, economists may still rightly worry about whether lower taxes will worsen the federal budget deficit or about the potential damage to GDP growth from tariffs and immigration curbs. .

Mitch Reznick, head of the London fixed income group at Federated Hermes, said: “Loose fiscal policies that support the economy in the near term may also lead to a reversal and widening of deficits in medium to longer term.”