Predictions for 2018
If 2018 is going to be about just one thing, it will be whether boosting the after-tax rewards to business investment results in a stronger economy.
I think the meme for 2018 will be this: waiting for GDP
On balance, I think it’s quite likely the economy is going to improve, and surprisingly so. Ordinarily that would be great news for the equity market, since a stronger than expected economy should result in stronger than expected profits. But the market is still cautious, so good news is going to be met with increased skepticism:
Risk assets should do well in this environment, given time, but there will be headwinds. Rising Treasury yields will act to keep PE ratios from rising further, so equity market gains are likely to be driven mainly by stronger-than-expected earnings.