Robert Shiller on the market rally: ‘Trump does magic’

Robert Shiller thinks the post-election rally could continue on in the short term, as enthusiasm over the election of Donald Trump spurs stocks higher.

"We believe that psychology drives the macro economy, and there's something changing our psychology," the Yale professor of economics and Nobel laureate said Thursday on CNBC's "Trading Nation."

"We have a business-oriented president who wants to cut corporate taxes, who wants to cut regulations, and who sympathizes with business," Shiller said. "Maybe it's not a good thing — it's a good thing for business, though."

"Once people start to believe that it's a new era, it could go on for a while, even if it's unfounded," since "it's about human psychology, and it's what they call self-fulfilling prophesy."

In this way, "Trump does magic," Shiller said. "Maybe it will be black magic sometime, but he's an amazing phenomenon."

The economist famous for his long-term valuation model even admits that such models, and earnings in general, lose their salience in such sentiment-motivated times.

"He's the fundamental right now," Shiller said. "It's all Trump. He's in charge, and it's really making a change."

"He'd better live up to the expectation," he added.

The S&P 500 has risen more than 5 percent since the election, and hit a record high Thursday. Interestingly, ahead of the election, many strategists warned that the uncertainty engendered by a Trump win would produce a substantial market drop.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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