2017 – a relatively smooth year
By the standards of recent years, 2017 was relatively quiet. Sure there was the usual “worry list” – about Trump, elections in Europe, China as always, North Korea and the perennial property crash in Australia. And there was a mania about bitcoin.
still in the “sweet spot” but expect more volatility ahead
- Despite the usual worry list, 2017 has been pretty good for investors as global growth and profits accelerated and central banks stayed benign as inflation stayed low.
- The “sweet spot” combination of solid global growth and profits and yet low inflation and benign central banks is likely to continue in 2018. However, US inflation is likely to start to stir and the Fed is likely to get a bit more aggressive. Expect a gradual rise in bond yields and a rising US dollar. The RBA is unlikely to start hiking rates until late 2018 at the earliest.
- Most growth assets are likely to trend higher, but expect more volatility and more constrained returns. Australian shares are likely to remain laggards.
- The main things to keep an eye on are: the risks around Trump; inflation, the Fed and the $US; bond yields; the Italian election; China; and Australian property prices.
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