Economic and Markets Outlook 2018: ContinuumFP In-House Analysis
Welcome to ContinuumFP’s Economic and Markets Outlook for 2018, where we present our Investment Committee’s expectations for the year ahead. This annual report is crafted to keep our clients, potential clients, and readers informed about the market trends and economic projections shaping the investment landscape.
Our insights are based on extensive discussions with fund manager representatives and an in-depth analysis of reports from leading fund management companies. This outlook serves as a benchmark to compare their investment philosophies with our market expectations.
2018 Market Performance Overview
We anticipate that the global investment markets in 2018 will largely mirror the performance of 2017, with a potential for market corrections throughout the year. For investors with a diversified global equities portfolio, these corrections may present significant buying opportunities.
Global Economic Outlook
Global Growth Projections
For the first time in several years, there is a widespread expectation of global economic growth, with most countries projected to see growth exceeding 3% in 2018. Resource-rich economies will benefit from increased demand, while service and technology-driven economies are likely to see improvements in productivity and employment rates. Despite these positive trends, geopolitical tensions are expected to rise due to the widening wealth gap.
Inflation and Central Banks
Inflation is not expected to surge despite the efforts of Central Banks. We anticipate a steady economic environment with minimal inflationary pressures.
Regional Market Insights
United States
The U.S. economy is forecasted to grow robustly at over 3%, driven by increased consumer and business confidence following tax cut legislation. The Federal Reserve is expected to raise interest rates three to four times in 2018, maintaining a measured pace of tightening. The U.S. continues to benefit from its growing energy independence and robust manufacturing and services sectors.
China
China’s economic growth is projected to stabilize around 6%, with the government effectively managing the property market to avoid a bubble. Debt management will be a key focus for China’s economic leadership in the coming years.
Europe
Europe is expected to experience slower economic growth compared to the U.S., with the European Central Bank gradually easing its monetary policies. Political uncertainty in key Eurozone countries could pose risks to the region’s economic stability.
Emerging Markets
Emerging markets are poised for growth, though they continue to face risks such as political instability and corruption. These economies, rich in resources and low-cost labor, are expected to contribute to global economic expansion.
Australia
The Australian economy is expected to grow by around 3% in 2018, with the Reserve Bank of Australia likely to keep interest rates steady until 2019. The country’s economy will benefit from high demand for its exports, although concerns about personal debt and wage stagnation remain.
Market Outlook by Asset Class
Equities
Despite concerns over high valuations, particularly in the U.S., equities are expected to perform well in 2018, supported by strong corporate profitability and a favorable interest rate environment. Emerging market equities offer attractive valuations, though investors should consider the associated risks.
Fixed Income
In a low-return environment, longer-duration bond portfolios are expected to deliver stable returns. Investors should focus on quality bonds with minimal volatility risk.
Property
The real estate market is stabilizing, with low interest rates supporting current valuations. However, growth is expected to be uneven across regions, with some areas, particularly in China and Australia, potentially peaking.
Investment Strategy for 2018
Investors should focus on long-term, yield-bearing assets, diversified across asset classes and regions. Regular portfolio reviews against SMART investment goals are essential for maintaining a well-managed investment strategy. Our investment managers will continue to implement these principles to ensure the best outcomes for our advised clients.
Get Expert Investment Advice
For tailored investment advice based on the 2018 Economic and Markets Outlook, contact Continuum Financial Planners Pty Ltd. Our experienced advisers are ready to help you achieve your investment goals in your best interests. Call us at 07-34213456 or use our Book A Meeting facility to make an appointment at your convenience.
For additional perspectives on the 2018 economic outlook, visit the websites of MoneySmart, the Reserve Bank of Australia (RBA), and major Australian banks like Macquarie.
(This article was first published in January 2018. It has occasionally been updated/ refreshed, most recently in August 2024.)