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What investors can expect from the market in 2018


(St. Louis Business Journal) 

“Where we stand today is a slightly overvalued market and a 20 percent return for 2017. We would be surprised to see another 20 percent return year for 2018. Instead, we would expect a more normal rate of return for the market, around 5 to 10 percent, perhaps leaning on the lower side given the valuation headwinds. We have the potential for earnings growth through a change in the tax code, and the tailwind, for the first time in a decade, of synchronized global GDP growth. — Ken Crawford, senior portfolio manager, Argent Capital Management”

January 5, 2018 (Greg Edwards)

After a record year of stock market gains in 2017, what can investors expect this year? We asked St. Louis money managers what they are telling their clients.

Where we stand today is a slightly overvalued market and a 20 percent return for 2017. We would be surprised to see another 20 percent return year for 2018. Instead, we would expect a more normal rate of return for the market, around 5 to 10 percent, perhaps leaning on the lower side given the valuation headwinds. We have the potential for earnings growth through a change in the tax code, and the tailwind, for the first time in a decade, of synchronized global GDP growth. — Ken Crawford, senior portfolio manager, Argent Capital Management

I am surprised by the relentless move upward by this market. Investors seem to be fearless of anything going wrong. In 2018, I look for higher interest rates driven by higher inflation. Bond prices are a bubble and will crash. Stocks will be flat to down 5 to 10 percent as multiples times earnings come down due to higher interest rates. — Joe Terril, president, Terril & Co.

As global growth returns and easy monetary policy recedes, we would expect higher rates and yields. This removes one of the main underpinnings for stock prices. On the other hand, tax reform will provide economic stimulus while encouraging investment. We note that all bull markets end with policy errors or shocks, and we are monitoring the risks. For now, we expect a volatile path to the market top as rates and yields rise, and remain alert for possible setbacks. — Ron Kruszewski, chairman, Stifel Financial Corp.

Low inflation and positive employment growth provide a very good backdrop for a continued market rally of mid-single to double-digit gains in 2018. — Gerry Sparrow, president, Sparrow Capital Management

Improving global economic growth and rising corporate earnings are the food that feeds the bull market and spurs it higher, but we expect its pace to slow from a trot to a walk with a few likely stumbles. As a result, our outlook for 2018 is slightly less rosy. We think the global economy will continue to strengthen, with U.S. economic growth likely to improve slightly to about 2.5 percent as corporate and personal tax rates are cut. — Kate Warne, investment strategist, Edward Jones

Interest rates are going to rise, gradually. Earnings should be good and growing. The tax cuts will bring back an estimated $1.4 trillion dollars overseas back to the U.S. Inflation is subdued. The market should return high single digits. If earnings grow faster than 9 percent, the market should be up more, say 12 to 14 percent. — Brent Spicuzza, managing partner, Summit Wealth Strategies

We think 2018 will bring positive but more muted returns supported by a favorable macro environment. The global economic expansion that began in 2017 will continue in 2018, with domestic earnings growth as companies benefit from deregulation and tax reform. Headwinds include an overheating of the U.S. economy, Fed Rate hikes and tighter financial conditions and elevated geopolitical risks. — Bob Chambers, president, Huntleigh Securities