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.