If You Think Trump's Victory Equals a Nonstop Stock Rally, You Need to Read This

Last week Donald Trump concluded his remarkable candidacy for resident of the U.S. with a surprising win. The initial stock market reaction was overwhelmingly negative before turning sharply positive.

Through Friday, the Dow Jones Industrial Average  gained some 500 points, while the yield on the 10-year Treasury rose by about 50 basis points. And although the initial reaction by stock market participants has been overwhelmingly positive, investors should be cautious, because the new environment under a Trump administration may not be as different as many think -- at least not for the stock market. Investors would be wise to remind themselves that markets react emotionally at first but always return to a fundamentals-driven environment. Below are some knee-jerk reactions that are likely to be proven false over the next year or so.

1. Bonds

Be wary about shorting bonds. The market's initial reaction, which caused the price of Treasuries to go lower and yields to go higher, was based on speculation that President-elect Trump's policies will have inflationary consequences. This speculation might be correct when it comes to his proposals, but the passing and implementation of Trump's policies have yet to be determined. After all, there is a significant divide between Trump and many members of Congress. Bonds most likely will underperform, but shorting them could be costly.

2. Energy

Investors are betting that soon-to-be President Trump will be a windfall for energy companies, particularly large petroleum exploration and production companies such as Exxon Mobil and Chevron. Perhaps, but renewable energy is unlikely to go away. Abandoning this sector could also prove to be costly.