I would like to welcome 2018 and write what I believe we will see in the business and economic headlines this year.
The first caveat is with President Trump on Twitter there is no way you can be too outlandish in predicting what may happen in 2018. The president can open up a number of cans of worms with less than 100 characters.Bitcoin will be making positive headlines early in the year with huge price jumps. Estimates of $40,000 are out there for mid-2018. As 2017 closed there seems to be an established support at $13K, while there is less than 1% buy-in from the general public.
Should hostilities on the Korean peninsula escalate you could see a $10K jump overnight as people in the south struggle to get wealth out of the country.
There are other hot spots in the global economy that could also spur large price spikes ranging from South American runaway inflation to South African unrest.
In early Feb., Jerome Powell will assume the chair position of the Federal Reserve, replacing Janet Yellen. Powell’s background of being a lawyer and a principal in private equity funds including the Carlyle Group, will have a much different bent on monetary thought at the Fed.
I believe cheaper money will be Powell’s defacto position, which will mean rate hikes will probably slow, but asset sales off the Fed’s balance sheet should accelerate.
These moves could see a continuation of flattening yield curve, which will hamstring bank earnings somewhat, although banks have moved away from business and personal lending.
Despite the initial hoopla to the Trump tax cuts with businesses giving workers bonuses and raises, 2018 will show huge company stock buybacks leading stocks to new highs. There will be little hiring from the huge corporate tax cut, since businesses have been doing more with less for the last decade.
Since the middle class will be paying for this corporate largess, there will be little revenue growth for many of these firms, so the firms will need to have share buybacks to grow the bottom line through earnings per share appreciation by retiring shares.
As an aside, many of the companies that came out quickly with bonuses and raises have business in front of the Trump Administration. Whether they were looking for merger approvals or possible criminal prosecution, Time Warner, AT&T and Wells Fargo fall into these categories.
I’m also expecting plenty of more boldface C-Suite names stepping down unexpectedly — such as Eric Schmidt from Google parent Alphabet. Whether it’s a result of sexual harassment victims outing them or White House disclosures or actions.
The Trump Administration will also have turnover as Gary Cohn, Director of the National Economic Council and chief economic advisor to the president, will step down early in 2018 after serving a year in the position to take advantage of the tax break people employ after serving in government.
What happens as the turnover occurs may result in a quite different direction for the economy. Twist and turns through presidential orders could bring more relieve to red state residents in time for the mid-term elections.
Personally, I am schedules for spinal surgery on my lower back later this month so 2018 could start as a pain in the ass for me, but hopefully the pain and diminished nerve feedback will be relieved.
Happy 2018 everyone, let’s make it special.