January 19, 2018

Is 2018 will be as good as 2017?

Management comment

Is 2018 will be as good as 2017? This is currently the burning question among investors, particularly as the beginning of this year remains bullish both in terms of trends, with US indices hitting new highs and certain European markets already returning almost annual performances, and also in terms of heavy traded volumes. Driven by strong macroeconomic data, as illustrated by the latest Chinese GDP growth rate of 6.9%, equity markets appear to be ignoring the risks which are potentially looming, such as higher interest rates, currency volatility and a rising oil price.

For the time being however, earnings momentum remains strong on both sides of the Atlantic, particularly in the US where profits will be boosted by corporate tax cuts.

In France, optimism exceeds all expectations. Even the UK newspaper The Economist, which is hardly considered as being Francophile, elected France as 2017 Country of the year. The election of Emmanuel Macron and the ensuing reforms implemented in a buoyant economic context perhaps represent a real opportunity to redress structural imbalances such as the double deficit, high unemployment and a disproportionate level of public expenditure. France is now perceived as an element of stability alongside the traditional Germany, which has nonetheless demonstrated difficulties in appointing new leaders behind the indispensable Angela Merkel.

Lastly, although the same economic euphoria is discernible in the eurozone, inflation data remains sluggish (1.4%) or at least in-line with bond market outlook. Inflation will have to be closely watched in 2018 as it will probably be the factor which will ultimately trigger steeper interest rates in the medium term.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in January 19th, 2018.

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Is 2018 will be as good as 2017? This is currently the burning question among investors, particularly as the beginning of this year remains bullish both in terms of trends, with US indices hitting new highs and certain European markets already returning almost annual performances, and also in terms of heavy traded volumes. Driven by strong...
2018-01-19