Once again, I will put my pride on the line and take a shot at what we might expect in 2018. But before we look ahead, let’s take a look back and see how my predictions for 2017 turned out.
10 PREDICTIONS FOR 2017
10: President Donald Trump will host Russian President Vladimir Putin at a state dinner at the White House. My grade: F — although it appears that their friendship is growing.
9: Both personal and corporate tax reform will take place in the first 100 days of Trump’s presidency. My grade: F
8: Trump’s proposed wall along the Mexican border will not be built. Washington, D.C., will move to improve relations with Mexico. My grade: B
7: Italy and France will vote to leave the European Union and the euro will be abandoned as a currency. My grade: F. Who knew the global economy would take off?
6: The Federal Open Market Committee will move rates up three or four times. My grade: A
5: With tax reform, infrastructure spending and repatriation of offshore dollars, the U.S. GDP will grow to 3 percent. My grade: C — I got the number right but not the cause.
4: Congress will reform the Federal Flood Insurance Program, bringing private insurers into our market. My grade: C. I will give myself some credit, though, because the issue is on the congressional agenda.
3: Hillary Clinton will not go to jail. My grade: A. Cooler minds prevailed.
2: The Affordable Care Act will undergo subtle changes but not be repealed. My grade: A
1: The equity markets, as measured by the S&P 500, will end the year over 2,500. My grade: A — and the markets actually ended the year over 2,600.
In reviewing my predictions for 2017, I give myself a C -. Who could have imagined that Congress — particularly Republicans — could be so rudderless? Obviously the Democrats didn’t help, but with Republican control of both houses of Congress and the White House, we should expect more. That is the bad news, but the really good news is that the economy actually performed well on its own. The global economy, led by U.S. corporations and solid earning, is in great shape going into 2018.
10 PREDICTIONS FOR 2018
10: The United Kingdom reverses itself and decides to remain in the European Union.
9: South Carolina voters elect Catherine Templeton as the state’s second female Republican governor.
8: The FOMC continues its efforts to normalize interest rates, raising the federal funds rate three or four times. The prime lending rate goes to 5.25%.
7: China is able to convince North Korea to discontinue its nuclear ambitions.
6: While the federal funds rate rises sharply, the long end of the interest rate curve only increases slightly — despite the Fed continuing to reduce the size of its balance sheet. The 10-year Treasury Bill will go up only .5%.
5: Allegations of Russian interference in the 2016 elections will continue to be an issue for the Trump administration.
4: Democrats will take control of at least part of Congress, possibly both chambers.
3: Stocks, as measured by the S&P 500, will continue to run higher and will end the year over 2,800, driven by a strong global economy.
2: Technology stocks will be the laggards and the financial and energy sectors will lead.
1: Personal and corporate tax reform passes and puts the brakes on property value increases on Hilton Head Island as a result of changes in deductibility on mortgage interest for second homes, investment properties and local taxes.
So there it is. I hope to improve my predictive performance this year. Financial planning will be essential in 2018 as markets are likely to see some volatility. The best advice is to rely on professional help and embrace a diversified portfolio.
Elihu Spencer is a local amateur economist with a long business history in global finance. His life work has been centered on understanding credit cycles and their impact on local economies. The information contained in this article has been obtained from sources considered reliable but the accuracy cannot be guaranteed.