2018 Schwab Market Outlook: It's getting late
Get perspectives from the Schwab Center for Financial ResearchTM(1) to help inform your client conversations.
Going into 2018, global earnings growth continues to be strong, while interest rates and inflation remain low and relative valuations of stocks to bonds reasonable – typical of the later stages of a market cycle.
We anticipate solid growth in 2018 and don't see a recession on the horizon. However, with markets priced for ongoing moderate growth and low volatility, the risks we're monitoring include the potential for higher inflation and more central bank tightening than expected.
- Global economic growth lifting earnings is likely to be a key driver for both U.S. and international stocks in 2018.
- Falling correlations across global stock markets bolster the case for diversification.
- We expect inflation to rise due to a tight labor market and accelerating wage growth.
- The Federal Reserve is poised to raise rates two to three times in 2018.
- 2018 could be the year 10-year Treasury bond yields exceed the three-year high of 2.6%.
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