As forecasted, 2017 was a strong year for the financial markets with positive returns in each of the major asset classes and double digit returns in the major equity classes. Can these positive returns continue into 2018? At Luma Wealth Advisors, our investment team is diligently and optimistically following several economic themes for 2018 and believes:
Indicators point toward positive growth
Several factors point toward continued growth in 2018 including recently released unemployment claims at the lowest they have been since 1973. Business confidence is also rising, and is the highest it has been since 2004. Recent tax cuts are helping, with many companies giving out pay raises, and home building remains robust, which tends to be a good indicator of a strong economy.
Strong S&P earnings are expected to continue
We believe corporate earnings will grow at an even faster rate, contributing to market increases over time. A positive economy tends to drive earnings, and earnings tend to drive the market, which is what we are experiencing now. In addition, the dollar has declined against major currencies, and a weaker dollar tends to help earnings, especially for larger, multi-national corporations. Finally, we expect the corporate tax cuts to have further positive effects on the market.
Inflation could be an issue, but is only a moderate risk
Recent trends indicate that the economy is expanding at its fastest rate since the financial crisis, and if this continues inflation may start to pick up as wages begin to rise. This is something we will be watching closely in 2018.
Although the Fed will likely raise rates, global central bank policies will be stimulative
We anticipate rates will continue to drift higher with the passage of fiscal reform and solid economic growth, and forecast that the next increase in rates by the Federal Reserve will be in March. However, we think global central banks overall will maintain current accomodative policy in 2018.
Luma Wealth’s investment specialists carefully track market trends
The investment specialists at Luma Wealth Advisors carefully follow the markets to provide a sound view of the investment world. Have a question about economic trends and how they may impact your investments? Give us a call! We’re here to help.