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After a year of surprises, US indices set for a decent finish

With the Dow Jones Industrial Average likely to finish 2016 at 20,000, Mr Trump's policy plans are likely to determine where it goes next.

US stocks finished flat last week, stalling at the psychological barrier of Dow at 20,000 in a rare fulfilment of one of this column's 2016 predictions.

A mea culpa: prediction is a humbling business. But 2016 made outright fools of anyone who dared talk about the future.

This year, conventional wisdom was a strangely unwise position. Events went so contrary to expectations that even the contrarians were caught by surprise. All the wise prognosticators promised that Donald Trump would flame out in the presidential primary and that Brexit would never get to a referendum. All the savvy commentators assured us that anyone who had soap actor Scott Baio - a man not known for his wisdom - as a convention speaker could not possibly win the general election. All the pollsters told us with scientific certainty that the Brexiteers would lose and that Hillary Clinton would win.

In the unlikely event that Brexit passed, stocks were supposed to crash and the British economy to crater. After brief ripples, stocks - and, at least at first glance - the British economy look stronger than ever. In the even more unlikely event that Mr Trump were elected president, the bull market was supposed to die. Instead, a new bull market was born, driven by old-economy stocks that investors had all but condemned to history - banks, coal miners and oil drillers.

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Most of the wise on Wall Street who now say that the "Trump bump" would be a fleeting phenomenon could also be proved wrong. After all, he has stocked his cabinet with bankers (such as treasury secretary nominee Steven Mnuchin), coal miners (such as Commerce Secretary Wilbur Ross) and energy drillers (such as Secretary of State Rex Tillerson). Mr Trump may or may not turn out to be a populist in the mould of Venezuelan Hugo Chavez, or something even more damaging to the American Republic, something like an American Caesar or a 1930s dictator, but he will definitely be remembered as a friend to corporations.

Strategists at brokerage LPL Financial boosted their estimates for 2017 economic growth, based on the likelihood of tax breaks and some kind of FDR-like programme of public works. After all, if there is one thing in which Mr Trump does have experience, it's building projects of a grand scale.

"The timing of the passage of president-elect Donald Trump's proposals on taxes and infrastructure as well as the speed of implementation will be important factors in the growth impact in 2017," said the LPL strategists, in a note to clients.

Analysts at brokerage Goldman Sachs said the lift to corporate profits from Mr Trump's planned tax cuts could be offset by changes in the treatment of how certain expenses are treated.

Michael Arone, chief investment strategist for State Street Global Advisors US SPDR unit, said that he expected the Trump bump to continue, but not necessarily smoothly. There are some "contradictory forces" that could limit gains, he said.

"The ones I think about are trade-oriented," said Mr Arone. The combination of a strengthening US dollar and more restrictive trade policies could lead to a "widening of twin deficits and in particular, the trade deficit", he said. "If the dollar continues to strengthen, you will in fact see exports in the US decline and imports rise."

Corporations will also suffer if the US dollar keeps appreciating, Mr Arone said. After all, "when the dollar appreciated very strongly in late 2014, early 2015 it . . . led to the onset of the earnings recession in the US."

These days, almost half of S&P 500 companies' revenue comes from overseas. The value of that revenue is diminished by a rising US dollar.

Indexes might drift higher next week and the Dow Jones Industrial Average might "punch through the 20,000 level", said Quincy Krosby, market strategist at Prudential Financial. "But you're going to have to wait until after January for a meaningful package of data. That will include the employment numbers and wage data."

January trading is still seen as indicative of the year to come. In 2016, the slide in January presaged one of the most volatile years for the stock market since the Great Recession. There was a technical correction - a peak-to-trough loss of more than 10 per cent for the Standard & Poor's 500 - brought on by fears of financial instability in China during the first quarter.

There's reason to expect that the tone will be a positive one in the stock market next week and early next year, if only for seasonal reasons, but there is one major wild card. This year, "Santa Claus", to whom strength in December and January is usually attributed, will take a backseat to another silver-haired, rosy-cheeked gentleman.

With the Dow Jones Industrial Average likely to finish 2016 at 20,000, Mr Trump's policy plans will likely determine where it goes next.