During his election campaign, the u.s. President-elect Trump proposed a series of economic policies, including cutting corporate tax rates, extending personal income tax cuts, and imposing tariffs on imported commodities. Analysts generally expect that overall, Trump's policy of 'tax cuts domestically, and tariffs abroad' will reignite inflation in the USA.

Top American economist and Wharton School finance professor Jeremy Siegel said on Monday that in order to avoid losing the support of stock and bond investors, Trump may not fully implement his proposed economic policies.

In an interview with the media, Siegel said he believes Trump will take a firm pro-market stance in the next term, even at the cost of sacrificing some of his proposed economic policies. He pointed out that Trump has been keen on using the stock market as a measure of the success or failure of a president, and as a result, he may not want to disrupt the current bull market.

"President Trump is the most stock market-supportive president in our history," Siegel added. "In my opinion, he is unlikely to implement policies that are unfavorable to the stock market."

Economists believe that some of Trump's proposed policies will increase the federal deficit and trigger higher inflation. The bond market has already reacted to these policies last week. After the election, u.s. 10-year treasury notes yield surged to over 4.4%, the highest level since July.$U.S. 10-Year Treasury Notes Yield (US10Y.BD)$

Although the yield on US Treasury bonds has since retreated and stabilized, Siegel said it is a sign that bond investors may be prepared to protest any policies that lead to increased government debt or intensified inflation.

This may also indicate that investors are concerned about the possibility of rising inflation and expect the Fed to raise interest rates.

"I believe that the rise in bond yields after Trump's victory last Wednesday is a warning, saying, 'Hey, be careful of your actions. We are here, we are skeptical of all the tax cuts you promised,'" Sigel said. "The bond market and the stock market will both be huge constraints on many of Trump's plans."

Sigel pointed out that in the Republican-controlled Congress, proposing an extension of the 2017 tax cuts by Trump seems easy, although he expects other tax cut proposals by Trump to face challenges. Sigel predicted that if Trump implements all his proposed tax cuts, bond yields could ultimately exceed 5%.

"Therefore, I believe the trend of rising long-term rates will accompany us," he added.

Sigel also stated that Trump is unlikely to seize control from the Fed. Despite reports that Trump is crafting plans to have greater influence over the Fed's policy decisions, this move may not be welcomed by the market.

"He may want a bit more negotiation, but the market likes the independence of the Fed. If he has any substantial disruption to the Fed's independence, that is not good for either the bond market or the stock market," he added.

Editor/Rocky