Will the bull run on the US stock market continue, or is a Trump bankruptcy expected? HAMISH MCRAE

So will the US indeed see a calm and measured end to its boom – the hope I expressed last week?

I fear – and to God I hope I’m wrong – that this won’t be the case. The Biden bonanza will end in Trump failure.

This is a minority view. Bloomberg looked through Wall Street expectations and noted that almost everyone is on the side of another positive year.

For example, BlackRock Investment Institute says: ‘We remain pro-risk. We see that the US continues to stand out from other developed markets thanks to stronger growth. We are increasing our overweight in US equities.’

JP Morgan Chase agrees: “We are bullish on American risk assets in a world where American exceptionalism is being strengthened.”

Citi said: “As for the US, we are closely monitoring developments but are broadly encouraged. We will continue to maintain our risk-taking posture, with American exceptionalism, until the end of the year.”

In Beverly Hills, Bel Air Investment Advisors is quite explicit: “We expect the bull market for global equities to likely continue into 2025, with the US likely to outperform the rest of the world again.”

Of course, after two stunning years in which the S&P 500 index rose more than 20 percent in both 2023 and 2024, there are cautious signs.

Most investment advisors warn people not to expect another year of such top returns.

Fidelity thinks: ‘We are mid to late cycle, not end of cycle, creating a volatile environment that should generally be good for risky investing, but puts a premium on the right investment choices .’

Goldman Sachs warns of ‘heightened tension’, but still predicts ‘modest positive returns for the major asset classes’.

But the only truly negative view I’ve noticed comes from London-based Legal & General Investment Management, which says: ‘We believe markets are misassessing a host of risks – and opportunities – regarding the 2025 outlook. ‘

So what can go wrong? There are certainly concerns about Donald Trump’s proposed tariffs, but I’m less concerned about that than about three other features.

These are a resurgence of inflation, unrest in parts of the economy that have over-borrowed, and the simple animal feeling among investors that they have done very well and it is time to take some money off the table.

Most economists agree that inflation is likely to decline more slowly than seemed likely even a few weeks ago.

There will therefore be fewer interest rate cuts by the Federal Reserve, and long-term interest rates will remain relatively high.

The yield on ten-year government bonds was 4.6 percent on Friday. But suppose inflation, currently 2.7 percent, rises well above 3 percent.

This is already much higher than the 2 percent target, and so-called core inflation is 3.3 percent.

At some point the Fed would have to recognize that interest rates cannot be lowered any further.

Fiscal policy will remain very accommodative, driven by tax cuts, and I saw the yield on those 10-year government bonds exceeding 5 percent.

That drives up borrowing costs for everyone else, which in turn slows the economy.

It also leads to problems for specific borrowed groups. For example, the number of defaults on office loans is at the same level as in the financial crisis years of 2011 and 2012.

Credit card defaults are at their highest level in fourteen years. Problems with car loans are almost as high as in 2008-2009. That’s tough for struggling borrowers, but so far the boom has been strong enough that lenders don’t have to worry too much.

But moods change, and that’s my third point. There may come a time when those who have done well think, wait a minute, let’s take some of our profits and hold more cash.

You can never predict that shift in sentiment, but we’ve seen it happen time and time again. Bubbles pop.

Don’t get me wrong. The U.S. economy will continue to outperform the rest of the developed world for many reasons. Never underestimate the power of corporate America.

However, I am certain that the financial markets will fall sharply at some point during Trump’s term. And I think it’s likely to happen this year.

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