'Trump trade' enthusiasts are being warned on getting too greedy

Global markets continue to rally after the initial shock of Donald Trump being elected U.S. president, but some economists are still issuing quiet warnings to investors amid the exuberance.

"There are some potential risks that should still be taken into account. These include the threats to trade agreements, old and new, and his (Trump's) pledge to halt immigration on which so many sectors of the American economy rely," Tom Elliott, international investment strategist at financial consultancy deVere Group, said in a note.

Markets rallied Wednesday with many expecting Trump to repeal regulations that have dragged on certain sectors of the market, such as banking, mining and pharma, as well as the likelihood of corporate tax cuts.

Republican president-elect Donald Trump delivers his acceptance speech as Vice president-elect Mike Pence looks on during his election night event.
Chip Somodevilla | Getty Images
Republican president-elect Donald Trump delivers his acceptance speech as Vice president-elect Mike Pence looks on during his election night event.

Elliott said that Trump's plans could well increase overall demand in the economy, boost growth and corporate earnings in the near term. However, he added that this could result in inflation further down the line and a "typical boom and bust scenario may follow."

Other experts echoed these concerns.

"The biggest risk I see is that Mr Trump feels the need to follow through on his anti-trade rhetoric by starting a trade war with China. The collateral damage could be large and many countries would be affected," warned Simon Baptist, chief economist at the Economist Intelligence Unit, in a newsletter.

"Domestically, consumer and business confidence will take a short-term hit, but Mr Trump's plans for tax cuts and infrastructure spending could give the U.S. economy a boost in late 2017 and beyond," he added.

Despite these concerns, some investors made strong gains on the rally in U.S. markets yesterday.

For instance, the billionaire investor Carl Icahn, who supported Trump during the campaign, revealed he made a $1 billion bet on stock markets following the announcement of Donald Trump winning the election. He revealed to CNBC that he used the overnight volatility to get long in the futures market.

The Dow Jones finished Wednesday's session up 1.4 percent; future values initially after the election result were 800 basis points down. The S&P 500 and Nasdaq both finished up 1.11 percent.

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