The High Risk, High Reward Trump Market

Markets abhor uncertainty.That bit of Wall Street wisdom helps explain their ebb and flow since Donald J.

Trump’s victory on Election Day, and even earlier.Stocks and bond yields began rising early in October, when Wall Street concluded that Mr.Trump would win.

The market surge accelerated after Election Day.Yet for the markets, uncertainty hasn’t vanished.It’s merely coming from another direction.

Because President-elect Trump’s approach to politics and economics is so disruptive and unconventional, markets have been straining to digest the implications of the power transfer in Washington, switching erratically between elation, confusion and occasional bouts of high anxiety.Aspects of the Trump platform are balm for the markets.He promises lower corporate taxes and less regulation: Those assurances are being widely interpreted as a recipe for fat company profits and a prosperous stock market.

The president-elect is also expected to try to extend tax cuts that he signed into law in 2017 and that expire at the end of 2025.Over the short-term, these measures are expected to stimulate economic growth.But not all of his program is positive for growth.

Mr.Trump is a self-described “tariff man,” calling for sharply increasing tariffs on China and lesser but substantial levies on all other trading nations.

Furthermore, he has promised a drastic reduction in immigration and a tsunami of deportations — a disaster for thousands of families, which, in cold financial terms, would reduce the supply of labor in the United States.Textbook economics tells us that adding tariffs and reducing the work force could slow the economy and spur inflation.Some companies might well benefit from these specific policies.

Stocks of private prison firms like Geo and CoreCivic, which can build and operate temporary detention centers, have risen with the president-elect’s fortunes, and shares of smaller domestic companies with little international revenue jumped after the el...