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Cheers and Fears for Investors in 2018

There’s reason for investor optimism in 2018 — as long as it’s tempered with caution. That message comes from Nigel Green, founder and chief executive of deVere Group. It is also part of the optimism of Rothenberg Capital Management.

While we are positive about 2018, our investors need to keep an eye on several key factors over the next 12 months that could increase turbulence.   Let’s consider the good news first. Here are Green’s top three drivers for 2018 optimism:

  1. Growth puts the pedal to the metal. “Global GDP growth is speeding up,” says Green, adding that growth is balanced across the globe. “Strong GDP growth is translating into good corporate earnings growth, which supports share prices.”
  2. Interest rates remain at historical lows. While the Fed and Bank of England are expected to hike rates in 2018, with rates remaining relatively low, “cash will remain an unattractive asset class, and bond yields will continue to be slender,” says Green. “We can expect this to further boost stock market indices.”
  3. U.S. tax reform becomes a reality. “Tax cuts in the U.S. could help boost the American economy and stock market which, in turn, will positively impact global economic growth and global stocks,”

Now for the concerns:

  1. Potential inflation. In 2018, tight labor markets could result in wage increases and, in turn, inflation.
  2. Loss of free trade. Trump’s negative view of multilateral trade agreements, and its consequences.
  3. A slowing China. As the country transforms into an economy based on services and household consumption, its government might become less willing to prop up failing industries and bankroll leveraged investors.