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These Will Be the Big Stories of 2018

These Will Be the Big Stories of 2018

Weihnachtsgans with chestnut stuffing … rotkraut … salzkartoffeln … plus a steamed and roasted ente, and, of course, a ham.

And do not forget the mustard, scharfer senf.

Yep … I'm still thinking of the Christmas supper I prepared for family and friends a week ago.

As you can see, I decided to go full-on Deutsch. My family on my father's side came from the Ländle ("dear land" in the local dialect) of Baden-Württemberg in the 1860s, by way of Baltimore.

Sometimes I hear those ancestors calling to me, as I learned they can do when I lived in Africa. You do not hear their voices, of course; you just get a feeling. That's their language. This year, they said: "Gans zu Weihnachten, von Jungen!"

The most important thing I've learned from my German ancestors is this: Nothing is permanent. Eventually, change will come. When you live in the middle of European history, it's inevitable.

Best be ready.

To honor my ancestors' wisdom, here are my predictions for 2018.

I'm no Nostradamus, but I'm going to stick my neck out and make a few calls for Wall Street 2018 based on evidence, logic … and history. And we have all year to see how I do …

Here goes …

Wall Street First Quarter

There will be a strong post-holiday stock market rally as tax-sensitive US sectors like retail and telecoms begin to post big gains on the back of the tax cuts and strong holiday sales. Combined with positive economic indicators and political giddiness from the passage of the tax bill, it's all systems go for 2018 … at least, at first.

Congressional Republicans move quickly on their legislative agenda – above all, cuts to Social Security and Medicare – since they are increasingly worried about their hold on Congress after November.

Bitcoin suffers a big correction after swinging wildly in the last 10 days of December. The Organization for Economic Co-operation and Development (OECD) has added discussion of bitcoin to its next ministerial meeting. The Chinese are cracking down. For these and other reasons, sometimes in the next three months we will see a sell-off as latecomers panic and sell. Long-term investors will remain in bitcoin and it will creep back up, but will not revisit its December highs.

Wall Street Second Quarter

Initially, there will be a continued uptick in markets as tax cuts beginning to take effect at paycheck level and consumer confidence improvements. But signs of doubt begin to creep into the market as US macro indicators begin to weak – especially job figures.

Congressional Republicans continue to pursue a series of rapid legislative victories, but progress comes to halt as the Robert Mueller probe of President Donald Trump's Russia ties hits a climax – either because of a round of indictments of senior figures or because Trump fires Mueller. Either way, the stock market reacts badly, with a string of sharp swings as investors wait to see which way things go.

Wall Street Third Quarter

As the fallout from the Trump-Mueller issue continues, several new allegations come to light. The US market begins to slide as the prospect of a Democratic sweep of the House and Senate in November grows. The fear is not of specific policy changes … but rather of increased political instability.

Because of this, the Federal Reserve is forced to pass on promised rate increases. A coalition of countries file a World Trade Organization action against the US because of provisions in the new US tax law.

The dollar begins to weakened significantly. The gold price begins to tick upward.

Wall Street Fourth Quarter

As the November election approaches, there is a decline in US equities. Volatility increases markedly until the election itself. Gold continues its rise.

Immediately after the election – and regardless of the output – markets stabilize, but at a lower level, leading to annual stocks index gains for 2018 of half or less than those of 2017. Subsequently, one of two scenarios unresold:

  • A Democratic seizure of one or both houses of Congress initiates a prolonged period of market uncertainty, with no clear winners or losers. Investors know the tax bill will not be reversed, but the prospect of Democratic committee investigations of the Trump administration increase instability, and causes many US corporations to hold off on investment plans in the meantime.
  • Republican retention of the House and Senate steels markets, but more bombshell revelations / allegations against the Trump administration come out, increasing the political temperature as the year ends.

A Final Prediction

So there you have it. I think it's going to be an interesting year on Wall Street. It surprises me that there is not more talk of the market effects of the 2018 elections already. But they will be the big story of the year.

Source by Ted Bauman

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