Two critical issues could stop Trump market rally

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Since the Presidential Election interest rates have risen dramatically and the U.S. dollar is getting stronger against foreign currencies. Both are signs that the so-called “Donald Trump Election Rally” could run into a brick wall in 2017. So far over the past three plus weeks, the Dow Jones Industrial Avg. is up over 800 points, crossing over the 19,000 point plateau for the first time. The S&P 500 and Nasdaq are also up, having added about 1.5% last week. However financial stocks only added 1.1% last week and the issues of the rising U.S. dollar and interest rates could be a serious threat to the President Elect’s economic plan in 2017.

According to CNN/Money

“Higher interest rates will increase the cost of borrowing for all Americans, especially those who want to buy houses and cars. The U.S. government’s 10-year Treasury note rate has jumped to 2.35% from 1.8% before the election, & The dollar’s value hit a 13-year high recently, rising about 4% against the world’s most popular currencies just in the past three weeks.”

CNN/Money adds that  a strong dollar will be a challenge for U.S. manufacturers because it makes America’s exports, such as cars, more expensive and less attractive to foreign buyers. For decades, jobs in the manufacturing sector have been shrinking.There were 53,000 fewer U.S. manufacturing jobs in October compared to a year ago.

One reason: Interest rates on U.S. bonds are rising is because investors believe Trump’s massive infrastructure-spending plans will add to America’s already-massive debt load.

Increased spending could cause inflation to rise faster, which would cause interest rates to go up more too. Higher risk can push up rates too.

Rates are also rising because many expect the Federal Reserve will raise interest rates in December for the first time in a year. And if Trump’s policies end up causing growth and inflation to tick up, it could cause the Fed to raise rates faster than previously planned. Simply: The stronger dollar is going to hurt U.S. manufacturers

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