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Pisani: Why the Trump rally will hit headwinds in 2017

Stock rally? Oil rally? Everyone's bullish now, but that will get tougher in 2017. But maybe investors who abandoned the market a decade ago will come back.

Here are three predictions for 2017.

First, the stock rally will continue ... but will hit major headwinds. The S&P 500 will hit a series of historic highs again within the first 100 days of Donald Trump taking office, but that will be it. The problem: Market participants are anticipating MUCH higher revenues and earnings due to tax cuts and fiscal stimulus, but actual company guidance will not match those high expectations. A stronger dollar, higher rates, inflation and possibly trade policy will emerge as potential headwinds.

Second, the oil rally will be a bust. As oil heads toward $60 a barrel, American producers will ramp up production, keeping prices down. The much-discussed agreement between OPEC and non-OPEC members to cut oil production will collapse among charges of widespread cheating.

Finally, 2017 will be the year stock ownership expands. The American public has seen declining levels of stock ownership for years. A Gallup poll earlier this year found that only 52 percent of households own stocks, tied for the lowest level on record. An earlier study found that 82 percent of all stock is owned by the top 10 percent of households. But rising GDP and greater optimism on the economy will finally reverse those trends in 2017, and households that abandoned the market after the financial crisis in 2008 will return and start buying stocks again.

Wouldn't it be great if that last prediction really happens? Wouldn't it be nice if more households owned stock? Stock ownership has becoming concentrated in a narrower and narrower group ever since the financial crisis.

Wouldn't it be great if that trend reversed in 2017?


  • Bob Pisani

    A CNBC reporter since 1990, Bob Pisani covers Wall Street from the floor of the New York Stock Exchange.

Wall Street