Market predictions 2018. As the year turns once again, many now are turning to a review of the past year, but more importantly, try to know where we are going in the future. So at Blue Point Trading we put together a list of ideas of what we could see for 2018. First, let’s review what we said last year at this time and see if we are right. Click here for the 2017 predictions.

The results of the 2017 predictions were reasonably accurate, though central banks remain stubbornly cautious keeping the dollar low and Bonds elevated.

The 2017 market predictions results (click here and here to see where this an more economic YTD data can be found):

  • Prediction: Equities positive gains of 5 to 15%. Results: US +19.42% and globally +21.81%. Largely inline.
  • Prediction: Bonds 0 to -5% down for the year. Results: US 10 Year +2.86%, US Corporates +7.76%. Slightly too bearish. Interest rates remain stubbornly low, supported by central bank dovish policies.
  • Prediction: The Dollar finishes flat. Results: -9.85%. Too bullish. The EU recovery and Brexit doubts, kept the Dollar under pressure.
  • Prediction: Commodities +10%. Results: +15.08%. Largely inline.
  • Prediction: Real US GDP to average 2.5 to 3.5%. Results: +3.2%. Largely inline.
  • Prediction: Corporate earnings advance at a rate of > 10% over 2016. Results: +18.86%. Largely inline.

Key 2018 themes and risks:

With all the breathtaking bubbles already being seen in the cryptocurrency space for 2017, these bubbles will continue to build even bigger in 2018, as all the central bank money from the past 10 years continues to creep out further into the economy and many other asset classes (with rotation). I am dubbing 2018, “the year of the bubble.”

In this “year of the bubble,” inflation will also become a reality. Central banks have been asking for this for years, and they may finally get it, and move quickly to tame it, causing a few shocks. They may be already behind the curve. The speed of the central banks will largely dictate how big and long these bubbles will get.

Learning to live with chaos. N. Korea, Middle-east wars and demographic replacement in developed countries will continue to breed terrorism, rumors of wars and with the election of Trump, many anti-Trump folks have lost their minds in outrage. Yet, the economy ticks on and what use to panic markets, don’t even get a second look. Most of these issues will be largely ignored.

No Trump impeachment. The evidence is not strong enough, too muddled and tainted. Only wishful thinking.

No North Korean war. Not even Trump will sentence 100 to 500K people to their deaths, before exhausting all economic leverages to stop North Korea. They have not really gotten tough on North Korea and the people they trade with.

The SJW get’s more ridicule and ignored. People’s focus will turn towards economic opportunity and the long run of the SJW and their antics will become more irrelevant in people’s lives. The social media run may have reached its peak and will stabilize.

One geopolitical hot spot that will flare up will be the Middle East. With ISIS sidelined, Turkey, Iran and Saudi Arabia get into a slow-moving regional war with Israel in the middle. The main effect this will have is on Oil, pushing price potentially back over $100. This geopolitical crisis coupled with inflation and the stronger demand from the developed world, could make this a reality and set up a crisis in late 2018 to 2019.

Other note worthy medium trend predictions to watch:

  • Demographic replacements of developed world populations continues.
  • In 2018 the space race heats up.
  • The rise of the drones and robots – especially in military usages.
  • Decades old offshoring/outsourcing manufacturing to emerging economies ends and is replaced by micro 3D printing robotic localized unmanned factories.
  • Brexit gives way to a soft Brexit.
  • Democracy declines, civil liberties reduced and government spying continues to grow.
  • Cryptocurrencies get regulated, industrialized and less volatile.
  • I still hold out hope that new small footprint energy source technology will come.

Every year I asked the question, “Will the people rise up?” – in a “Black Swan” event to demand a revolution, as wealth inequality continues to expand. The answer is probably not, as global growth and jobs continue to look positive. This will only happen until a real crisis comes. So far not in the cards for 2018. That being said, with the “year of the bubble’ theme, a lot of irrational optimism will abound leading to some over-leveraged future crisis in the future … 2018 may be the last good/reasonable year before the bubble pops and crisis comes. We shall deal with a future crisis when it comes, so for now … enjoy.

The 2018 market predictions:

  • Equities – with the “year of the bubble” theme, equities could see a good year with positive gains of 5 to 15%, though volatility will make it an interesting trading year.
  • Bonds – interest rates will continue to rise, finishing 0 to -5% down for the year.
  • The Dollar could continue its slide in 2018 with non-US growth accelerating – down 5 to 10%.
  • Commodities – With an inflation theme setting in, we could see some additional good rallies of > 10% in commodities.
  • Real US GDP looks to advance 2.5 to 3.5% with similar global growth.
  • Corporate earnings look to advance at a rate of > 10% over 2017, giving fuel to a further equity rally.

Here is a potpourri of links to 2017 year in reviews and 2018 predictions (if you find more interesting links, please put them in the comments section of this Blog post):

2017 year in review:

the Guardian
Voice of OC
World Bank
Business Standard

2018 predictions:

the Street
the Atlantic
USA Today
Science Alert

Learn more on this, review of the news headlines, technical analysis and more on your daily YouTube Blue Point Trading Morning Call. Click here, or watch below a video summary of this report.

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Blue Point Trading – Market Predictions 2018

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