In this second of a special three-part Big Question, managers tell Investment Week that investors need to keep a more vigilant and realistic eye on the economy now that Donald Trump has begun his first term as US President.
Lewis Grant, senior portfolio manager of the Hermes Global Equity fund
Dangers of a closed-door policy
It is easy to understand why investor optimism has surged following Trump's victory. Once he takes office we anticipate a fiscal splurge, with pro-growth policies and a business-first stance likely to be beneficial for the earnings of US companies.
And the optimism extends beyond investors, with US consumer sentiment also reacting favourably to the new President.
However, we remain cautious about the long-term implications of Trump's plans. Investors can be notoriously short term and this rise in confidence ignores the challenges that Trump's aggressive policies may bring. We may be heading for a world of increased protectionism and distrust.
Globalisation has become a dirty word, but more open borders and free trade have brought huge economic benefits. Trump's stance on climate change has the potential to be catastrophic.
Despite the 'drain the swamp' rhetoric, Trump's cabinet selection does nothing to suggest that tackling corruption and inequality is high on his agenda.
It is easy to ignore environmental and social risks and to focus on the potential boost to corporate earnings, but these risks have material costs, both to corporate earnings and to wider society.
Stephen Moore, manager of the Artemis US Extended Alpha Fund
Underweight healthcare
Confidence indicators in the US have risen very strongly since Trump's victory in November - but so have equity prices.
The surge of optimism about the transformative effect of a Trump administration has been such that a correction must be possible should the hoped-for stimulus and tax cuts take longer than the market expects.
The corporate tax changes are a clear positive but they might not be passed until later in the year. Most macro indicators, meanwhile, indicate that we are in the later stages of the current economic cycle and it remains to be seen whether the stimulus measures Trump has promised can prolong it.
We remain particularly cautious on healthcare and have increased our underweight in the sector since the election: drug pricing could yet come under pressure.
The market had worried that a Clinton presidency would see prices coming under scrutiny, but President Trump has also signalled his willingness to intervene and dismantling Obamacare could also prove disruptive.
So as we enter 2017, we are cautious on the outlook for the US market as a whole, while still finding opportunities both short and long.
Jeff Keen, director, fixed income and macro research at Waverton Investment Management
Gradual interest rate rises
There is no doubt that optimism is high among consumers, businesses, and in financial markets. This has been largely attributed to Trump's victory last November, which is ironic given that the consensus prior to the result was that it would be disruptive and generally raise investor uncertainty.
The anticipated cut in taxes and additional spending on infrastructure are eagerly awaited but the uncertainty surrounding policies on trade and protectionism, and also on foreign policy, remain the big questions for 2017. Trump is not necessarily the driver of optimism.
Equity markets are primarily driven by profit expectations, so it is higher inflation and the improving outlook for the global economy that has been responsible for the rally - this started last summer, prior to the election.
CPI is approaching 2% in Germany and expected to reach 3% in the US, reducing the risks of deflation. At the same time, with central banks seemingly extremely tolerant of higher levels of inflation, interest rates are expected to rise only gradually.
Trump may well find himself in the fortuitous position of being able to congratulate himself on his early achievements in his Presidency - something he will surely not be shy in exploiting.
