Reacting to the speech, Santosh Rao from Manhattan Venture Partners highlighted a clear gap between political messaging and ground-level realities, especially for American consumers grappling with elevated costs.
“There is a slight disconnect what he said and what is going on. The big word right now, big operative word right now in the US is affordability and the prices have gone up. So, he is saying that they are coming down. So, it is debatable, some prices are, some not,” he said in an interview to ET Now.
Rao pointed out that inflation remains the key variable, with the upcoming CPI data expected to offer clarity after months of uncertainty.
“We did not have data, so we were running blind so far. So, at this point CPI if it is reasonable, three or less than three, then it is fine, then he is able to control the prices.”
Despite Trump’s optimism, Rao stressed that prices have not meaningfully declined from a consumer’s standpoint.“It has not come down appreciably that I can say because I live here and I pay for it.”Market Rotation, Not a Santa RallyWhile inflation pressures linger, equity markets are already positioning for what lies ahead. According to Rao, investors are rotating away from crowded trades and reallocating towards sectors expected to benefit from policy support.
“Stock market what you are essentially seeing is a rotation. Money coming, people taking profits out of the winners and putting it in financials and healthcare and other areas.”
However, expectations of a year-end “Santa Claus rally” appear muted.
“This year end just ahead, we are not getting that Santa Claus rally that we are expecting but we will get there at some point but next year we will definitely see much better activity.”
Fed’s Tightrope WalkMarkets are also closely watching the Federal Reserve, which has signalled openness to rate cuts despite inflation staying above its comfort zone. Rao believes expectations may be getting ahead of reality.
“So, at this point the market is factoring one cut which just happened and then probably in the first quarter or first half you will get another cut.”
He cautioned that a combination of rising inflation and a weakening labour market could corner the Fed into a difficult position.
“Your inflation going up and labour market is going slowing down, you are pretty much in a stagflation kind of scenario.”
For now, Rao expects limited easing. “So, I am in the camp of one cut next year and if anything other than that the market will not like it.”
2026 Outlook: Tailwinds Build UpLooking further out, Rao believes a confluence of fiscal incentives, easing oil prices and liquidity events could drive stronger momentum.
“There is a lot of liquidity flush events… He has incentives for housing. He has incentives for other areas as well. And the oil prices are coming down which is a big incentive.”
Trade tensions, a lingering concern for global markets, are unlikely to dominate the narrative next year. “We know where the tariffs are. It is settled now. We have some visibility.” Any selective tariff reductions could even help ease domestic price pressures. “That should help the affordability issue that is really haunting him.”
Politics and Markets IntertwinedRao underscored that 2026 being an election year will heavily influence policy direction, with growth-friendly and populist measures likely to take centre stage.
“He is going to be very pro-growth, just kind of very friendly policies that will keep him popular.” The bottom line, according to Rao, is constructive. “So, net-net, we are expecting a good 2026.”
As markets navigate the near-term uncertainty around inflation and rates, investors appear increasingly focused on the longer runway — one shaped by policy incentives, political compulsions and the promise of renewed economic momentum.
