Kass said he is not without concerns. He worries that Trump’s threats about raising tariffs on imports could hurt trade, slow the U.S. and world economies and derail the surge in the financial markets.
Kass expects the Federal Reserve to continue gradually raising interest rates by a quarter point several times, which could provide competition for the stock market among fixed income securities such as corporate and municipal bonds and U.S. Treasuries.
“Fixed income securities will gradually become more attractive as interest rates rise, but interest rates are, and likely to remain, at historically low levels even after likely rate increases next year,” Kass said.
The low interest rates could combine with infrastructure and defense spending increases to bolster economic growth.
“Gross domestic product should grow faster, corporate profits should be higher, and therefore I would expect equities to do well during 2017,” he said. “It’s still a very favorable environment.”