Does the worldwide economic growth presuppose that all sectors will experience a good year? Actually, no. For some markets, the bear could still replace the bull. In times of unusual Wall Street volatility and Bitcoin’s boom in 2017, what financial markets should investors watch out for in 2018? Let’s see what we might expect during the next months.
1.) US stock market
Volatility is back. After a long period of incredible performance and stable growth, Wall Street has experienced a shocking swing. The biggest daily drops for the Dow Jones and the S&P in more than 6 years interrupted the record run of the market.
Stocks moved from negative to positive, highlighting volatility’s return to the market that till recently had no valuable shifts. The Dow index, representing the shares of 30 leading US companies, showed a more than a 1,100-point variation between its high and low, after it broke through the 25,000 milestone at the beginning of 2018. To the investors’ relief, the shares didn’t suffer a lot that day and the Dow Jones rebounded with its biggest swing in over a year – up 567 points.
2.) FAANNG stocks
Originally, the acronym looked like FANG and included Facebook, Amazon, Netflix and Alphabet’s Google. Subsequently, it was extended to FAANG and embraced Apple. In late 2016, the star performers survived another change and looked like FAAA, reflecting China’s Alibaba success on NYSE. The latest addition, creating the acronym FAANNG, came to celebrate the rapidly rising Nvidia.
These top six tech companies enjoyed a stable strong run for a while and some experts predict that a correction is due in 2018. Should expect the FAANNG boom to bust like the dotcom bubble in 2000? Maybe. However, areas like Big Data, Artificial Intelligence, IoT, e-Commerce and Cloud Computing still promise future growth.
3.) Japan’s stock market
In 2017, Japan’s Nikkei 225 index, like the Footsie and the Dow Jones, experienced a winning streak. However, unlike the London and New York stock markets, Tokyo didn’t manage to reach an all-time high.
Still, the world’s third-largest economy, Japan, expects more positive prospects than it has for many years before. Continuing seven years of gains, the Nikkei is expected to end 2018 at a level of 25,000, representing nearly 10% of the yearly increase and the index’s best since 1991.
4.) Bitcoin and cryptocurrencies
The largest cryptocurrency by market cap, Bitcoin, was the most popular and widely spoken-off cryptocurrency of 2017 and this trend will continue in 2018. However, Ripple (XPR), became the star performer and gained an air of respectability, standing out from other cryptocurrencies. Last year XPR skyrocketed to an outstanding 35,000% vs. Bitcoin’s gain of 1,500%.
Analysts predict that new regulation will curtail the progress of Bitcoin in 2018, resulting in its volatility. At the same time, having debuted on the Chicago Mercantile Exchange, Bitcoin futures will conquer other markets such as NASDAQ.
5.) Emerging markets
As the outcomes of the financial crises have finally faded away, resulting in evident economic recovery, there are a number of emerging markets that can draw our attention in 2018.
Though China scaled back its ambitions to reach the annual double-digit growth of the economy, its progress is still impressive. Growth for 2017 comprised 6.8% and is expected to reach 6.4% in 2018.
According to the World Bank, India will keep up with China and accelerate up to 7.3% this year, reaching 7.5% by 2019/2020. This upside is expected to be particularly big in India, where new-sprung middle-class consumers help corporations generate big profits for investors. A more-or-less stable macroeconomic and political environment, the fight against corruption and a reformed tax system have helped India’s economy outperform most emerging markets.
Analysts are also positive about key Asian economies, from Indonesia to South Korea, and expect significant growth in Latin America.
The impact of Brexit drew some attention away from the UK market and turned it to other parts of Europe. Property prices in Spain began to recover from its downturn, starting with commercial property and extending to the residential sector.
Growing amounts of capital is flowing into Europe’s real estate markets from Asia, attracting investors from China and Hong Kong. However, London remains the investors’ favourite location, followed by Amsterdam and Frankfurt. Predictions for the US real estate market are also bullish.
According to the Global Property Guide, the top performers of 2017 included Iceland (18.8% growth), Hong Kong (13.1%), Macau (10.5%), Canada (9.7%) and Romania (9.4%).
Traditionally, the investors’ favourite commodity – Gold – showed a reasonable performance in 2017 too. Regarded as a safe heaven, the metal increased by 12% and closed 2017 at $1,300 per ounce, which is still far away from its all-time record of $1,900.
Experts predict favourable conditions for crude oil, which is already traded at its highest due to the policy of restricted production. The same applies to industrial metals, including zinc, copper and aluminium, that also benefit from the increased demand and supply constraints.
8.) Corporate bonds
In 2017, the US corporate bond market was “on fire’, according to the Financial Times. Companies raised a record of $1.14trn of debt. However, the forecast predicts an upcoming ending of this boom.
The European corporate bond market also experienced stable growth with corporates selling €96bn of high-yields bonds in 2017, which surpassed the previous record of €76bn.
9.) Foreign exchange
Traditional currencies give way to cryptocurrencies in 2017 and further extended this trend into the 2018 year. Still, sterling fought back some ground after the post-Brexit downturn in 2016. Sterling and euro hold their positions, with the Eurozone enjoying the best growth its seen in a while. The euro is firmed and further forecasts look positive.
The value of the dollar, on the contrary, lowered by 10%. In 2018, Goldman Sachs predicts a “soggy dollar”, stating that it has “all but finished pricing the relative strength of the US versus the global economy”.
10.) Fine wines
Prestigious champagnes showed themselves as good investments last year, with individual vintages providing investment returns of 20%. Indeed, during 2017 the most traded fine wines performed very well.
Still, together with coins, stamps and other collectables, wines do not depend on stock market vulnerability and attract investors, trying to diversify their