### Trump Cabinet Picks and Hawkish Monetary Policy Dampen Stock Market Rally

The initial surge in the stock market following Donald Trump's election victory has hit a significant roadblock as concerns over hawkish monetary policy have prompted investors to reassess their positions. Despite the Wall Street's bullish sentiment since the election, the market faced potential week-on-week losses. This reconsideration was particularly stark on Friday, with healthcare stocks experiencing a notable decline. The S&P 500’s healthcare sector dropped by 1.7%, exacerbated by a 5% fall in Pfizer’s stock.

This downturn partly stems from Trump’s unconventional cabinet appointments, most notably Robert F. Kennedy Jr., a known vaccine skeptic, being chosen to lead the Department of Health and Human Services. The announcement triggered a late Thursday afternoon dip that carried into Friday's trading session. Sevens Report founder Tom Essaye noted in his Friday brief to clients that these factors, coupled with the strengthening dollar reaching a 12-month high and the 10-year U.S. Treasury yield rising from 4.29% to 4.44% post-election, are making investors reevaluate the potential impacts of the incoming Republican administration.

While the overall post-election reaction from Wall Street has been positive, cautionary notes have emerged from Bank of America. Their leading equity strategist, Savita Subramanian, highlighted that investor sentiment and positioning have become "dangerously bullish," citing mutual funds holding the lowest percentage of assets in cash in over a decade, and a record high number of consumers expecting stock prices to rise over the next year.

Bank of America economists, led by Aditya Bhave, expressed similar concerns in their Friday communication to clients, emphasizing the significant uncertainties surrounding their growth forecasts due to the likelihood of "sweeping policy changes" under a fully Republican-controlled government. Despite these warnings, Bank of America maintains a year-end price target for the S&P 500 at 6,000, anticipating a near 2% increase from the current 5,880, but still below Monday's all-time high of 6,017.

Wall Street largely perceives the Trump administration as a positive influence on the stock market. Goldman Sachs strategists recently suggested that Trump's proposed lower corporate tax rates could enhance annual earnings estimates for S&P companies by 4%. However, investors are advised to tread carefully as the market navigates these uncertain political waters.