All investors want to know what to expect in this new year. We endeavor to tell them, as that’s our business. It’s an activity laced with potential failure. For example, no one expected the lower interest rates and 20% plus increase for many major indices of 2017. But that’s what we got and part of why we are hesitant to predict 2018’s investment landscape. That said, here goes nothing:
The market will be more volatile. It simply has to be following 2017’s one directional market. We see several 5-10% pullbacks likely. Investors should anticipate these pullbacks and weather them with the understanding that minor pullbacks are symptoms of healthy markets rather than sick ones.
Interest rates will end the year higher and some of the stock market gains will be fueled by investors switching from fixed income to stock positions. Bonds should be held at appropriate levels as they remain (in our minds) a good offset to stocks. Modestly higher rates will be part of an improving economy rather than a situation of uncontrollable inflation.
In 2017 international markets outperformed domestic markets for the first time in several years. We expect this to continue and believe investors should beef-up their international holdings.
The American consumer will have more money in his/her pocket and will not hesitate to spend it. The hesitant US consumer will rebound with a vengeance. We think retail, technology, restaurant and consumer discretionary stands to benefit. Despite our expectation of a volatile market that will test investors, we feel strongly that by year end it will pay to have owned stocks.
Please note that all data is for general information purposes only and not meant as specific recommendations. The opinions of the authors are not a recommendation to buy or sell the stock, bond market or any security contained therein. Securities contain risks and fluctuations in principal will occur. Please research any investment thoroughly prior to committing money or consult with your financial advisor. Please note that Fagan Associates, Inc. or related persons buy or sell for itself securities that it also recommends to clients. Consult with your financial advisor prior to making any changes to your portfolio. To contact Fagan Associates, please call 518-279-1044.