Key Calls for 2018
J.P. Morgan’s award-winning research team provide forecasts
on key topics shaping markets in the year ahead.
2017 was a good year for the global economy. There was broad-based growth across developed and emerging markets, central banks started the process of normalizing monetary policy and equity markets across the world reached record highs.
What can we expect in the year ahead? 2018 will be the ninth consecutive year of global expansion. Should we be contemplating a market correction? Where are clients being advised to put their cash to work? And how many hikes is the Fed expected to make over the next 12 months?
Here are some of the key calls for 2018 from J.P. Morgan’s Global Research team, voted Top Global Research firm in the latest Institutional Investor rankings.
The long, dark shadow cast by the global financial crisis has receded and a traditional global business cycle dynamic is taking hold. Supportive financial conditions and rising sentiment provide fuel for a second year of synchronized above-trend global growth in 2018 – at 3.3% or faster.
The J.P. Morgan forecast envisions upside to growth across developed and emerging markets. The European economy has expanded by 2.6% over the past year, its best showing in six years. The demand engine and business equipment spending are the key drivers sustaining global growth in 2018.
The Fed will march forward on rate normalization. With U.S. unemployment rates continuing to fall and core inflation expected to rise, the Federal Reserve is expected to increase policy rates once per quarter through the end of 2018 - a 100 basis point rise from current levels.
Central bank tightening is still in early stages. Overall, global policy rates are anchored by expectations that the ECB, BOJ, and PBOC stay on hold. A combined $700 billion rise in the ECB and BOJ balance sheets more than offsets the Fed’s ~$400 bn decline in balance sheet.