STORY HIGHLIGHTS


Predicting 2018

CNC
Added On December 7, 2017

With the year coming to a close, some are already turning their attention to 2018.
 
On Tuesday, Bank of America Merrill Lynch gave their predictions for the year ahead.
  
All in all, BofA Merrill Lynch Global Research are predicting a strong world economy, and say they are "generally optimistic".
 
Among its 10 macro economic predictions, the investment bank sees the Standard and Poor's 500 Index continuing to rise, and hitting 2800 by the end of next year. It expects earnings to grow six percent.
 
Real global GDP is expected to come in at a solid 3.8 percent, up slightly from 3.7 percent in 2017. 
 
Stocks are expected to outperform bonds for the seventh consecutive year in 2018, a track record not seen since 1928. 
 
Above-trend growth is expected in most major economies, particularly the Eurozone, Japan, and the US. 
 
But these will continue to be outpaced by emerging market economies - predicted to grow nearly five percent in 2018, and with China growing 6.6 percent.
   
The U.S. unemployment rate will continue to drop to 3.9 percent in 2018. and a tightening labor market will likely allow inflation to pick up.
 
There are some worries. 
 
The bank notes "three important downside risks" including "politics, trade protectionism, and a larger-than-expected rise in inflation".
  
As well as raising central rates, the bank predicts inflation to be back across the board. As well as rising to 1.8 percent in the US next year, it also predicts rising inflation in China and emerging Europe. 
  
It also worries that the market may be underpricing the risk that U.S. tax reform could have on the system. 
 
The U.S. dollar is expected to rally in the first quarter, supported by rising interest rates and funds creeping back to the US due to tax reform.
   
The bank also says that robust global demand and tight supplies could see Brent crude oil rising to 70 dollars a barrel by mid-year - the first time it's hit that since 2014.