Markets 'complacent' about the risks of a Trump win, strategist says

• The former president's tax reform bill in 2017 cut the top corporate tax rate from 35% to 21%, and he has vowed on the campaign trail to lower it further to 15% if he is elected to a second term.
• Felices said that the market is "fairly complacent about the risks associated with a Trump win, fiscal expansion (e.g. tax cuts, defence budgets) and military conflict escalation."

Markets are "fairly complacent" about the risks of a second Donald Trump presidency, which could trigger a "tantrum" in long-duration bond markets, according to Guillermo Felices, principal and global investment strategist at PGIM.

Wall Street has enjoyed a remarkable rally since November last year, culminating in both the Dow Jones Industrial Average and the S&P 500 hitting record highs on Monday.

Much of the market focus remains on short-term economic data and on what it means for the Federal Reserve's potential interest rate cutting path this year.

Bullishness in risk assets is driven largely by the consensus that the Fed will begin cutting rates rapidly in the early part of the year, and that the U.S. economy will manage a "soft landing" — bringing inflation back to the Fed's 2% target without triggering a recession.

Some analysts are also looking ahead through a fiscal and geopolitical lens to November's U.S. presidential election and beyond.

Trump's tax reform bill in 2017 cut the top corporate tax rate from 35% to 21%, and he has vowed on the campaign trail to lower it further to 15%, if he is elected to a second spell in the White House.

Risk of a 'duration tantrum' in bond market

In an email to CNBC on Monday, Felices said one of the developments that limited PGIM's optimism versus the market consensus for an economic "soft landing" in the