One thing we believe could be a big theme of 2018 is synchronized global growth. While some countries are leading the way, we are starting to see others catch up. The G-7 countries are all growing at above average rates, including emerging markets. Central Banks around the world continue to nurture their economies by keeping rates low. Global GDP is on track to be 3.5% to 4% which is above average. Japan has grown seven consecutive quarters in a row which hasn’t happened in three decades. World economies are close to hitting on all cylinders but keep in mind that this doesn’t come without risk.
It is possible we could get a shift in parties from Conservative to Labour in Great Britain. If control changes to the Labour party it could be problematic for the Brexit deal and trade. This could possibly slow the economy a little bit. One other thing to keep an eye on is China tightening their monetary policy. If they do tighten their policy we could see this trickle to other areas such as Latin America, which is commodity driven. One last thing to mention is the current Administration. The Administration has historically had low poll numbers and has had a tendency to reach out on things internationally. This could impact trade in a negative way.
At the tail end of 2017 we’ve seen productivity shoot up to unexpected high levels. Are these one off data points or will we continue to see this trend in 2018? This question is important because, as a worker, if you are able to be more productive then a company can afford to pay you more. We could also see higher wages which could produce growth domestically. Also, we are watching interest rates very closely. Right now, the Fed is expected to raise rates three times in 2018. If that happens this could push the 2 year treasury above the 10 year treasury resulting in an inverted Yield Curve (Click Here to watch Yield Curve Vlog). If the Fed continues to raise rates and we don’t have borrowing costs go up that’s when a risky market could form. One last thing we are keeping an eye on is changing business models. When you have changing models people tend to disagree on the value of the business model. When you have these disagreements in models you could start to see consolidation and mergers. Next year could be a big year of changes.
Fi Plan Partners is an independent investment firm in Birmingham, AL, serving clients across the nation through financial planning, wealth management and business consulting. Fi Plan Partners creates strategies in the best interest of their clients using both fee based investing and transactional investing.
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