Highlights
• While there are concerns that the bitcoin market could become a material source of volatility, bitcoin billionaires argue it is a distinctly non-correlated asset class that provides “alpha.”
• The first quarter of 2018 should enjoy stronger growth as capital spending by companies continues to expand, and as global growth supports U.S. exports.
• The prospects for tax reform and scaled-back regulations have spurred U.S. corporate and consumer confidence. As a result, mergers and acquisitions should gain pace in 2018.
• Although projections for rate hikes include three moves in 2018 and two in 2019, much depends on the effects of tax reform and possible increase of infrastructure spending.
• Chinese growth, while still solid, could slow as the authorities restrain government spending and place tighter controls on bank and online lending.
Q4 Lookback
The last quarter of 2017 was filled with the now-familiar headlines warning of impending doom for markets. The “Hindenburg Omen” was back, along with an equally foreboding “Titanic Syndrome,” both sell signals suggesting that the market’s underpinnings were resembling 1999 and 2007, just before major sell-offs. Geopolitical worries, too, continued to hover over markets.
Still, global markets climbed higher toward the end of 2017 thanks in large part to stronger earnings, strong credit markets, economic growth gaining strength, positive leading indicators, accommodative central banks and the potential for a U.S. tax reform package that should substantially lower corporate taxes. In other words, the sort of backdrop that provides the catalysts for markets to power ahead and demonstrate resilience.
However, even the most optimistic analysts question whether markets are priced for perfection and poised for the kind of pullback that burns off enough froth to provide for more rational valuations. Pullbacks have been nearly non-existent, save for a couple of days in which the technology sector worried itself over the negative implications of a possible tax provision.