Now that we know with certainty the outcome of the 2016 U.S. Presidential Election, it is time to focus on the scenarios that will favor some financial sectors during 2017 and possibly beyond. How will the stock market react?

Stock market scenarios

It is worthwhile to note that these scenarios are not realized yet, so we should be clear about a differentiating opinion from facts. Some sectors, like energy, finance, infrastructure, healthcare, security and national defense could really be affected if the new president starts implementing the financial and political program that helped him win the election.

Healthcare is a sector that may be hit hard if “Obamacare” is actually repealed, and while the new president says that his intentions are to reduce fiscal deficits and boost economic growth and productivity, there are serious potential dangers. If new legislation reduces gun control and makes it easier to get guns, then there could be more catastrophic violent events with innocent victims.

If there is less regulation for financial services, then we could see another financial bubble, as cheap money will attract risky investments, and after what happened in 2007 to 2008, we all know what the result of that would be.

The U.S. economy needs more growth and to create more jobs. Often the U.S. leads the world in economic development, setting an example for other countries. There is a mixture of possible scenarios, some which are real and achievable, and some that are just words.

The U.S. president-elect’s strategy paid off, as he won the election, despite most polls predicting his defeat. His political promises and financial plan were filled with many provocative and challenging announcements that caused many to fear the worst.

Despite these fears, the stock market did not collapse, and in fact, continues to rally. However, at some point, the valuation of stocks will emerge as a major concern, so prudence is required in order to not keep chasing stocks that have outperformed expectations recently. Yes, they continue to go up, but what if an opportunity for profit-taking suddenly appears? This scenario, although not guaranteed, is very likely. Investors should be on alert to book profits if they have a short-term investing horizon.