Stock and crypto investors are unbothered by Trump’s economic threats

Wall Street and crypto investors are shrugging off warnings from economists about the risks tied to President-elect Donald Trump’s policies.

Stocks are soaring, and Bitcoin traders are seizing opportunities despite dire predictions. While economists clutch their pearls over tariffs and immigration curbs, investors are doubling down on optimism, convinced Trump’s plans will boost profits and push markets higher.

The S&P 500 hit so many record highs last year, powered by tech giants and bullish sentiment. Despite a minor pullback recently, market strategists expect a 10% gain in 2025, thanks to robust earnings growth.

Analysts project S&P 500 earnings to jump 15% this year, compared to 9% last year, with net profit margins widening to levels not seen in a decade. But not everyone’s popping champagne. Economists are warning that Trump’s policies could disrupt economic growth, make inflation worse, and restrict the Federal Reserve’s ability to cut interest rates.

Wall Street bets big, economists cry foul

The contrast between Wall Street’s enthusiasm and economists’ gloom couldn’t be starker. According to a Financial Times poll, over half of the 47 surveyed economists predict Trump’s policies will have negative consequences.

Around 10% expect these impacts to be severe, while only 20% see any potential upside. The major culprits? Trade tariffs and immigration curbs. These are the same policies that many investors believe will supercharge U.S. manufacturing and exports.

Fund managers remain cautious about revising profit forecasts just yet, citing uncertainty around how much of Trump’s rhetoric will translate into action.

Even with these uncertainties, the numbers paint a compelling picture for investors. The tech-heavy “Magnificent 7” stocks—companies like Apple, Microsoft, and Tesla—are expected to grow earnings by 21% this year, down from 33% in 2024.

Meanwhile, the rest of the S&P 500 is set to narrow the gap, with earnings growth projected at 13%, a huge increase from just 4% last year. The optimism isn’t limited to tech anymore. Other sectors are starting to feel the effects of Trump’s pro-business vibe.

Economists, though, are playing the long game. They worry that Trump’s tax cuts could balloon the federal deficit and that restrictive trade policies might harm GDP growth. But here’s the thing: there’s actually very little correlation between economic growth and stock market performance. Investors are chasing near-term gains, while economists fret over long-term consequences.

Bitcoin stumbles, investors pounce

Over in crypto land, Bitcoin is dealing with its own drama. The world’s largest cryptocurrency has shed 4% this week, sending some traders into panic mode. But seasoned investors are seeing red as a signal to buy.

According to CryptoQuant, Bitcoin’s current dip is far from the end of its bull run. Metrics like the Short-Term Holder SOPR, sitting at 0.987, tell us that many investors who bought Bitcoin within the last six months are selling at a loss. Historically, this kind of capitulation sets the stage for a rebound.

Cycle indicators like MVRV, NUPL, and the Puell Multiple also suggest that Bitcoin’s recent correction is a temporary hiccup, not a full-blown trend reversal. The cycle hasn’t peaked yet, and CryptoQuant thinks that smart investors are likely scooping up cheap Bitcoin from short-term sellers.

Meanwhile, the Crypto Fear & Greed Index, a barometer of market sentiment, has dropped to “Neutral” for the first time since October. This shows a cooling mood among traders but is still far more optimistic than the traditional markets’ equivalent index, which sits at a gloomy 32/100, firmly in “Fear” territory.

But the crypto community is too busy preparing for its Trump Inaugural Ball in a week to care about market bears.

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